Autumn Statement 2023: takeaways

Autumn Statement 2023: takeaways

brown concrete building near body of water during daytime

In the Autumn Statement 2023, the UK government revealed an array of measures designed to stimulate and support businesses of all sizes. These steps aim to eliminate any investment barriers, to help bridge the productivity gap that currently exists between the UK and other G7 countries.

The Office for Budget Responsibility (OBR) has taken a cautious stance on the economic outlook for the medium term. It anticipates that the growth rate of the real GDP will see a downward adjustment; averaging 1.5% from 2024 to 2027. This is a decline of 0.6 percentage points from the March forecast.

The Autumn Statement’s proposed initiatives are anticipated to contribute approximately £17bn per annum on average from 2024/25 to 2025/26. Furthermore, these measures are projected to boost GDP by just under 0.3% on average from 2024/25 through 2028/29.

In a significant move, the Chancellor declared a fourth consecutive freeze on the business rates’ small business multiplier. He also extended the relief for Retail, Hospitality, and Leisure (RHL). In addition, a commitment was made to reform planning procedures, take action against late payments, and reduce National Insurance Contributions (NICs).

Business growth measures

The Chancellor announced a Backing British Business plan comprising 110 measures designed to stimulate business growth. The most significant provision among these is the perpetual full expensing of capital expenditure. This will allow businesses throughout the UK to claim 100% capital allowances for qualifying primary rate plant and machinery in the year they make the investment.

The year-long business rates relief extension brings a sigh of relief for entities operating in the retail, hospitality, and leisure sectors.

Small businesses, grappling with an upsurge in late payments, have been advocating for decisive action. In response, the Chancellor declared the release of the Payment & Cash Flow Review Report. The public sector is set to pave the way, with companies vying for government contracts worth over $5 million required to prove their ability to pay within an average of 55 days from April 2024. This timeline will be reduced to 45 days in April 2025 and eventually get down to 30 days.

Starting April 2024, the RDEC and SME schemes will merge. Businesses that are operating at a loss will see a tax rate reduction from 25% to 19% under the consolidated scheme. Additionally, the R&D intensives scheme will lower its intensity threshold from 40% to 30% for accounting periods commencing from 1 April 2024 onwards. Companies that fall below the 30% benchmark will still be eligible for relief for an extra year.

Aside from business-specific measures, the statement also included a host of infrastructure advancements and levelling up initiatives. These include funding for British manufacturers, the establishment of three advanced manufacturing Investment Zones, and new devolution deals across England. Mayoral deals with Greater Lincolnshire and Hull and East Yorkshire, and non-mayoral deals with Lancashire and Cornwall, will boost investment right across the country and deliver on the Prime Minister’s commitment to levelling-up.

There will be more support for the development of artificial intelligence and the life sciences sector, recognising their potential as key growth sectors for the UK.

With an aspiration for the UK to become an “AI powerhouse”, the Chancellor has pledged to allocate £500m for the establishment of investment centres to further develop Artificial Intelligence in the UK.

The Chancellor announced £4.5bn of spending over five years to attract investment in green energy and advanced manufacturing.

NIC cuts

The headline rate of National Insurance Contributions (NIC) will be cut by 2% to 10%. This will be introduced from 6 January. The flat rate class 2 NIC will be abolished for self-employed individuals with profits above £12,570. The class 4 rate of NIC will be reduced from 9% to 8%.

Skills, welfare reforms and Living Wage increases

Elsewhere, the Chancellor announced an increase in the National Living Wage to £11.44 an hour from April 2024, which may prove difficult for some sectors, such as hospitality. A fund of £50m will be made available to pilot ways of increasing apprenticeships in key growth sectors. A combination of health and wellbeing support, incentives and punitive measures were announced to encourage people off of welfare and into work.

The Chancellor also reinforced the new £2.5 billion Back to Work Plan for those with long-term health conditions, disabilities and difficulties finding employment, which includes tough new sanctions for those who can work but choose not to.

The Chancellor also announced that the government will honour its commitment to the triple lock in full, with the state pension to increase by 8.5% in April in what is the second biggest ever cash increase. Universal Credit and other working age benefits will also be boosted by 6.7% in April, in line with September’s inflation figure as is convention.

Further action to help families includes increasing the Local Housing Allowance rate to cover the lowest 30% of rents from April – benefiting 1.6 million households with an average gain of £800 in 2024/25 – and an alcohol duty freeze to 1st August 2024, following common-sense changes of the duty system made possible by Brexit. Measures today take the government’s total support for the cost-of-living between 2022-25 beyond the £100 billion mark, to an average of £3,700 per household.

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