Spring statement does little to excite UK consultants

What is expected to be the last budget before the 2024 general election has been dominated by discussions around the impact of tax cuts on small businesses and individuals. However, consultants have also highlighted “short-termism” relating to investing in education and public services, which may have knock-on impacts on the growth of the UK economy.

Over the last year, small and mid-sized businesses have gradually been abandoning the government, when asked which political party best represents their interests at the next election. With that landmark vote now months away, the latest update from Bibby Financial Services has found that 37% of SMEs believe Labour – currently in opposition – is their best choice.

This is a rise of 4% on the last time the firm polled the sector, while support for the ruling Conservative Party sank by 4% over the same period. While interestingly that still means that the largest portion of SMEs do not see either party as their best option, it does suggest that businesses are less and less convinced by the rhetoric of the incumbent government around the economy.

Speaking ahead of the budget, Jonathan Andrew, CEO of Bibby Financial Services, commented, “It’s clear policies announced in the autumn, such as freezing business rates and late payment reforms, haven’t done enough for the Conservative Party to win over the SME population just yet. Our SMEs are ambitious and resourceful, so with a general election on the horizon, the government should use the Spring Budget to inspire the UK’s SME community and present a convincing vision for growth.”

This is not something which seems to have transpired, however. Indeed, there was an outpouring of stern criticism from the consulting sector, following the announcement of Chancellor Jeremy Hunt’s spring budget – expected to be the last before the general election is held.

Among the fierce rebuttals of the budget was one statement from Neil Armstrong, a tax director from professional services firm Baker Tilly Mooney Moore. Labelling the spring statement a “bland and beige budget where the chancellor has played it safe”, Armstrong bemoaned the way Chancellor Hunt had “limited himself to minimalistic tax cuts on the individual rather than employers and businesses”.

He went on, “In terms of personal finance, the National Insurance cuts are welcomed and based on a salary of £35,000, the 2% reduction in National Insurance will result in a saving of £448 per annum with the maximum savings for an employee being £754 per annum once these cuts are implemented… The raising of the VAT threshold from £85,000 to £90,000 will be welcome news for small businesses and hospitality, although this amount will feel small after a seven-year freeze.”

Richard Godmon, a tax partner at audit and advisory firm Menzies, seemed even less impressed with the budget – and unconvinced by the individual benefits of the cut to National Insurance. Suggesting the announcement was “clearly aimed at winning over disgruntled voters”, he contended that most still wouldn’t be any better off amid the cost-of-living crisis, as the cut would be cancelled out by the “freeze in tax band thresholds – a measure brought in when the PM Rishi Sunak was Chancellor”.

Godmon added, “This Budget was largely a case of too little, too late for most businesses. The Chancellor needed to use today’s announcements to shore up the stuttering UK economy. A roaring success it was not. And as with last November’s Autumn Statement, it’s disappointing to see the Chancellor largely neglect British businesses with today’s measures. No such cut in the NI rate was announced for employer contributions, for example – a measure that would have been welcomed by struggling businesses in the retail and hospitality sectors especially.”

Similarly biting sentiment came from Andrew Webb, the chief economist at Grant Thornton Northern Ireland. He noted that while the chancellor’s words were “plentiful”, they did not seem likely to add up to plentiful business growth – “despite how he tried to frame them.”

While he pointed to an extra cash injection heading the way of the newly agreed Northern Ireland Executive – amounting to an extra £100 million – would “be welcomed”, he added that due to “the seemingly perma-fiscal crises the Executive finds itself in”, the funds were “unlikely to excite”. Meanwhile, the floating of “the intention to perhaps abolish National Insurance tax” will be kept under review, as it was presented alongside the slightly non-committal caveat of occurring “when it is affordable to do so”. With both political parties endlessly alleging that the country’s coffers are running on empty, that may be a very distant prospect.

While business consultants broadly framed tax cuts as beneficial to small businesses and individuals struggling in the current economy, meanwhile, others were keen to ask how they might impact an already under-funded public sector in the coming year. Justin Martin, local and devolved government leader at PwC, warned that “the financial stress being placed on an increasing number of local authorities” was not a matter the budget addressed effectively.

“In order to deliver on levelling-up, net zero and housing needs, councils have to play a central role in national plans. The Chancellor’s targeted pots of investment are not enough to spark discernible change… Services provided to citizens are only going to worsen without additional investment in local government. While there is limited fiscal room for funding public services, there is the power to offer councils more scope to encourage long-term investment from business in places, jobs and housing.”

Elsewhere, on a similarly downbeat note, Derreck van Gelderen, a data and AI expert at PA Consulting, suggested that the budget was a missed opportunity to help the UK maximise potential gains from artificial intelligence. While he contended that “the UK has the potential to become the world’s next Silicon Valley”, he said that it lagged behind “rival global leaders” such as the US, China and Singapore, thanks in part to very little being said about the need to invest in education.

Van Gelderen explained, “The UK desperately needs to take a pivotal role in embracing AI education and embedding comprehensive AI literacy across the education sector to cultivate a generation of thinkers, creators, and innovators who will navigate the future with confidence and imagination… Even the most ground-breaking solution will hold no value unless it is being used effectively. AI has the power to help people explore complex concepts, experiment with new ideas, and visualise solutions in ways previously unimaginable. Only by focusing on educating all generations will the UK be able to meet its goal of “making the UK a great place to build and use AI to change our lives for the better.”

This was an opinion echoed by the National Centre for Universities and Business (NCUB), which also suggested in its response to the budget that the Chancellor “missed an opportunity to propel long-term economic growth”. With technological advancement rapidly transforming the world, it added that “the UK’s short-termism risks putting us on the backfoot”.

Joe Marshall, Chief Executive of NCUB, explained, “There were no bold, new announcements to truly shift the dial and drive growth through a more innovative, highly skilled economy. Previous commitments to grow public research funding and release more private sector investment are critical, but further intervention is needed to put university funding on a more sustainable footing. Only then will we build, grow and attract further private investment into the UK.”