On Wednesday, Chancellor Philip Hammond delivered the first autumn budget in over 20 years (Chronicle Live). With the UK economy teetering in limbo amongst stagnant Brexit negotiations, Hammond’s announcements received a mixed response. We take a closer look at some of the key announcements affecting UK businesses.

Key points to the budget (BBC)

Fuel, Transport & Infrastructure:

  • Fuel duty remains frozen for petrol and diesel cars
  • Rise in Vehicle Excise Duty for cars, vans and motorcycles registered before April 2017 (in line with inflation)
  • Vehicle Excise Duty rise by one band in April 2018 for new diesel cars that are not meeting the latest Real Driving Emissions Step 2 standards (BBC). This only applies to new diesel cars – existing diesel car owners won’t be affected, neither will van or truck owners.
  • The diesel supplement in company car tax to rise by 1%
  • Proceeds will go towards a new £220 million clean air fund in the most highly polluted areas in England. This will be used to offer people support as measures are put in place to lower pollution levels. For example, to reduce the cost of public transport for low income families, or investing in more energy efficient buses. (Gov.uk)

  • £540 million to support the growth of electric cars (incl. charging points) – of this £400 million is to be allocated to a charging infrastructure fund, an extra £100 million for a Plug-In-Car grant, and £40 million to be invested in charging research and development (Huffpost)
  • £45 million to be invested into tackling 90,000 potholes across England (Greater Birmingham Chamber of Commerce).
  • The Chancellor has asked the National Infrastructure Commission to look into the future of freight and its contribution to congestion and pollution (Energy Live News)
  • In addition, the government has pledged to support research into driverless cars, aiming to get the first models on the road in the UK as early as 2021 (The Inquirer).

Business:

  • A freeze on small business VAT threshold of £85, 000 for two years
  • In April 2018 Business rates to be raised in line with CPI (Consumer Price Index) rather than RPI (Retail Price Index), a cut of £2.3 billion. This will happen two years earlier than planned, and business rates revaluation will take place every three years rather than five (Greater Birmingham Chamber of Commerce).
  • Rise in the National Living Wage of 4.4% in April, from £7.50 to 7.83 an hour, that’s an extra £600 for a full-time worker (Huffpost)
  • Income rate tax threshold will rise from £11,500 to £11,850 for a basic rate taxpayer, and the threshold for a higher rate taxpayer rises from £45,000 to £46,350 in April (Which?).

Other:

  • An extra £3 billion to be spent on preparing for Brexit over the next two years (House of Commons)
  • £2.3 billion to be spent on investment into research and development (BBC)
  • Hammond also announced that the government will be investigating  how a tax on single use plastic items could be used to reduce pollution and waste (Independent)

Growth Forecasts:

The Office of Budget Responsibility has amended the GDP growth forecasts for the next few years, after slower than expected productivity growth, dropping from an estimated 2% this year to 1.5%, and from 1.6% to 1.4% for next year (The Independent).

Industry Responses

Both the Road Haulage Association and the Freight Transport Association have expressed disappointment with the lack of concessions for the transport industry in this Budget. Despite the continued freeze on fuel duty, Christopher Snelling, Head of Policy for the FTA made it clear that a cut in the duty would have made a huge difference to the industry

At a time when British business is under extreme pressure to prove its credentials and reinforce existing trading relationships, Mr Hammond has missed an opportunity to cut these costs, and make the UK a more competitive place to do business” (Logistics Manager)

In contrast, the organisation FairFuelUK welcomed the decision to continue the freeze on fuel duty on behalf of its 1.5 million supporters (Logistics Manager).

Overall, The British Chamber of Commerce offered an optimistic response, praising the Chancellor on the continued freeze on fuel duty as a positive for businesses, especially the self-employed and smaller businesses. However, speaking on the change to business rates, Mike Spicer, Director of Economics for the Chamber, said

“The switch from RPI to CPI indexation is a step in the right direction. However, this still leaves firms facing a 3% increase in April. The government could have done more to boost confidence and productivity by going further, and abandoning the uprating altogether this year, given the climate of sluggish growth and uncertainty” (BCC)

The Verdict

Although the switch to an Autumn budget and Spring statement provides businesses with more time to prepare for changes before the new financial year begins, this Autumn’s budget proposals are less bold than expected, appearing to be most beneficial for consumers rather than businesses. The end of stamp duty for first time buyers, a new “Millennial Railcard” and a freeze on duty for most alcoholic drinks is certainly indicative of this. The biggest test however, will involve the UK’s economic future post-Brexit, with European and International trade deals playing a vital part of anchoring Britain’s role as a successful economic player in the world. Hopefully the Spring Statement will provide a greater insight into this, and offer more secure solutions for UK businesses.

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