Chancellor Jeremy Hunt today unveiled what he called a huge boost for British competitiveness in an Autumn statement for growth. He announced a series of measures with an “overall impact of £20bn a year within the decade – the biggest ever business boost for business investment in modern times”.
Key to this was a series of measures such as the abolition of class two national insurance entirely, saving the average self-employed person £192 a year, as well as a one per cent cut in Class 4 national insurance from April – and a two per cent cut in employee national insurance contributions by the start of next year.
He said the government will invest £500m over the next two years to fund more innovation centres to help make the UK an “AI powerhouse”, something inspired by the success of the supercomputing centres in Edinburgh and Bristol. He announced £50m in funding over the next two years to increase the number of apprentices in engineering and “other key growth sectors” and an increase in the National Living Wage by 9.8% to £11.44p per hour.
In response, Tina McKenzie, Policy Chair at the Federation of Small Businesses, said: “Jeremy Hunt has today taken very welcome action on late payments, small businesses’ rates, and self-employed taxation. Small businesses – and the 16 million people who work for them – are the route to future growth that will raise living standards across the whole country.
“The Chancellor and his Treasury team deserve credit for driving pro-small business change and for listening to and working closely with FSB and its small business members to address the real concerns of businesses, and acting to help build future prosperity.
LATE PAYMENTS
“The Chancellor is right to have condemned from the despatch box the scourge of late payment practices. Driving out the worst payers from Government contracts and increasing the reputational risk faced by those large corporates who use their small suppliers as a form of free credit is not only the right thing to do to lessen the absolute stress and strain so many business owners face – it is also the way to increase the amount of working capital small businesses can put to good use building up their businesses and investing in the future. This is real leadership on this issue and we look forward to continuing to work with the Government, including the Business Secretary, to drive out bad payment practices.
BUSINESS RATES
“Business rates are one of the absolute worst taxes faced by small firms. Size matters when it comes to rates, and the Chancellor is absolutely right to have concentrated his firepower on helping the smallest firms at the heart of so many communities. Thousands of pubs, cafés and small shops in high streets across England will be pleased today with the bold, measured and targeted support from the Chancellor to help them through troubled times and build towards growth.
“FSB’s teams in the other UK nations will now be pressing their relevant devolved governments and decision-makers to use any consequential funding to extend similar support to these hard-pressed sectors in their own economies. Meanwhile, by acting to help small businesses with premises through freezing the small business multiplier, the Government has prevented an inflation-linked hike for many of those in the supply chain and other sectors too.
“This will also help to make the rise in the National Living Wage more affordable. FSB will work with the Chancellor and the Treasury to take stock of what firms need before the rise comes in.
SELF-EMPLOYMENT TAX
“The UK’s four-million self-employed people play a hugely important role in the labour market and in building growth across the whole economy. The Chancellor’s decision to reduce the rate of self-employed National Insurance, and abolish the Class II element, are extremely welcome, easing the burden on strivers up and down the country. FSB has long campaigned for the abolition of the Class II element of National Insurance and the reduction of Class IV, and we are therefore pleased that the Chancellor has acted.
LOOKING AHEAD
“FSB will be looking in more depth at the full details arising from today’s Statement, including the various consultations and plans announced. When it comes to late payment, business rates and self-employed tax, it is unquestionably clear that the voice of small business has been heard today. This game-changing small business package shows the prioritisation of pro-growth measures where they will do most good, while getting the best bang for the taxpayer buck.
“We will continue to engage with all of the main political parties across the UK as we head towards next year’s General Election to make sure that policy proposals from all sides work in the best possible way for small firms. The UK’s 5.6 million small business owners are a large and motivated part of the electorate.”
Other reaction
Andy Fishburn, Managing Director, Virgin StartUp, says: “Today’s statement offers a glimmer of hope for the next generation of British business founders at a worrying time where one in 10 new businesses are concerned about their survival rates in the next 12 months. Many will be relieved to receive the planned business tax cuts, especially as this time last week we didn’t think it would happen, but sense has prevailed. It’s particularly rewarding for small business owners who are being recognised as the backbone of the British business economy. Without investment in SMEs, who make up 99.9% of businesses in the UK, it would be an (even longer) road back to economic growth, so it’s a relief the Chancellor has taken note and is incentivising investment in businesses. That said, small businesses still deserve more commitment from those in charge of the purse strings. Issues like rising inflation, the cost-of-living and a lack of support for underrepresented founders mean we’re not out of the woods, but Britain’s entrepreneurial spirit is yet to be crushed and I’m going to bed happier knowing the next generation of British business founders have an improved chance at success.”
Julia Turney, Partner at independent consultancy Barnett Waddingham, says: “In a bid to solve the UK’s productivity puzzle and boost a workforce still struggling to return to pre-covid numbers, the Chancellor has announced a slew of measures designed to help disabled people back into the work. Ranging from a long overdue reform to the fit note system and the announcement of a new universal support programme, it’s good to see the Government take an innovative approach to tackling such a sensitive issue. However, the plans are still high level and vague at this stage. Success (or failure) depends on execution. We can’t burden employers with more compliance, but instead can arm them with accessible, cost-effective solutions. Nor can we force individuals into work that’s unsuitable for them. We need to create an environment in which they thrive. By finding this balance, we don’t just solve the productivity puzzle, we also foster a pool of talent to ensure a resilient workforce.”
David Wells, Logistics UK’s Chief Executive, says: “The decision to make the current full expensing allowance for capital permanent is a welcome step that will support logistics businesses with long-term planning and investment. Our members are keen to identify if this change will include the cost of acquiring leased or hired vehicles, as well as those purchased outright. In addition, detail is needed to identify whether the move will cover the cost of installing the infrastructure required to help the industry decarbonise, as our research shows this could amount to an outlay of up to £1 million per site – a prohibitive charge which will hinder the industry’s shift to net zero.”
Mike Randall, CEO of Simply Asset Finance says: ““The increase in National Living Wage will be well received by workers across the country, particularly in the current inflationary environment. However, we should not forget that for small businesses it’ll be yet another increase to overheads and present a tough balance for achieving growth alongside an increased payroll. Support to address this increase needs to be top of the agenda for the Government when thinking about the recovery of the UK economy. It’s imperative SMEs receive the right advice, support and initiatives to enable long-term planning, and access to the right financing solutions for them to prosper.”
R&D tax
James Clough, CTO and Co-founder of Robin AI:“More funding is pivotal to innovation. A simplified R&D tax credit will be beneficial to both early-stage companies and those that are looking to scale. This decision particularly affects AI startups as high computing costs can make research within this sector a very capital-intensive exercise. Simplifying tax credits for deeptech and AI will be transformative for the sector and boost confidence for investors and founders alike.”
Tim Mills, Managing Partner, ACF Investors: “The Chancellor’s focus on economic growth through measures such as simplifying R&D tax credits and confirmation of pension fund reforms provides a boost for innovative companies across the UK. These are positive changes that will encourage early-stage investors to back exciting British companies and help foster an ecosystem that is able to turn the thriving startups into world-beating businesses.
“However, if our politicians collectively are serious about wanting to deliver growth and create a science and technology superpower, it is essential that they use the autumn statement as a stepping stone. The investment community has been stung many times in the past by flip-flopping over policy decisions. To make investments that play out over the long term requires stability in policy and a clear vision for the future. The Chancellor took a step in the right direction today.”
Ralph Rogge, Co-founder and CEO of Crezco: “After last year’s Autumn Statement, we saw confidence amongst UK SMEs drop significantly, with about one-third feeling less confident in their ability to grow. We welcome the Government’s new measures such as simplifying and cutting business taxes as this will help the underserved SME sector flourish and will instil confidence in the sector, which is vital to the recovery of the wider economy. Simplifying R&D tax credits will allow SMEs to invest deeper into technology and innovation, further establishing the UK as a fintech and entrepreneurial powerhouse.”Neil Ruth, Founder of WellCell: The Chancellor’s raft of announcements today benefit scale-ups and later-stage companies but we are still missing genuine support for early-stage startups. I launched and exited my first two businesses in the UK when the conditions were much more favourable. However, with my latest venture I already have my sights set on Barcelona. Without the right support for homegrown startups, the UK risks losing huge potential from a technical, talent and economic standpoint to more startup-friendly shores abroad right from the earliest days.”
Sarah Turner – Ambassador of HomeGrown and co-founder of Angel Acadame: “The Autumn Statement offered cautiously supportive policies for the UK’s fast growth technology sector, and policy measures that are unlikely to stoke inflation, which is exactly what we need. Continuing to drive down inflation is still the number one priority, and combined with simplified R&D tax credits will help bring stability for UK businesses.”
Tax breaks
Tom Adcock, Tax Partner at Gravita: “While the Chancellor has refrained from confirming plans to scrap inheritance tax (IHT), it’s clear that the government is considering various options to strike a balance between reducing the deficit and offering an enticing tax proposition to garner voter support. However, the reality is that the government cannot easily relinquish the £7 billion and growing revenue stream generated by inheritance tax without alternative measures. This begs the question of whether capital gains tax (CGT) may be a fairer and less contentious substitute or if a new tax burden may be imposed elsewhere to fill the fiscal gap.
“Capital gains tax (CGT) offers a practical solution that can be adjusted to handle factors like exemptions, charges on cash, and its application to trusts, making it a viable replacement for IHT). In a broader sense, CGT embodies what IHT should aim to be. It’s a fair and more user-friendly system since it taxes everything based on its market value, making it less complex and easier for the government to manage. The future of inheritance tax remains uncertain, but it undoubtedly forms a crucial part of the ongoing fiscal debate.”
Seb Wallace, Investment Director at Triple Point Ventures: “The move by the Chancellor to reduce the rate of tax for loss making companies from to 19% from 25% is a significant step in the right direction for the tech startup community. By reducing scrutiny and streamlining the process for R&D claims, the government is sending a clear message of support to innovation-driven businesses. This decision fosters an environment where companies can channel more energy and resources into what matters most – groundbreaking research and development.”
Pensions
James Clough, CTO and Co-founder of Robin AI: “We are pleased to see the Chancellor’s Mansion House reforms. UK pensions are a source of untapped wealth which will both enable more investment into fast-growing tech startups and help the UK cement itself as a global leader in the sector. With increased funding, we would not only see more startups harnessing rapidly evolving technologies but also more skilled individuals being attracted to the UK and world-leading companies staying and listing here. This is a welcome step because the government is promoting a regulatory and investment environment which fosters innovation and funding for new and developing technologies. This decision will slow down startups that are looking to enter or are already in the global race.”
Priya Oberoi, Founding General Partner of Goddess Gaia Ventures: “We are happy to see the government move forward with its plans to channel pension funds into the UK’s thriving startup ecosystem. Tapping into the latent wealth of UK pensions will unlock greater funding routes for high-growth companies in the UK, particularly healthtech startups where the road to commercialisation is long and requires significant patient capital.”
Green Industries Growth Accelerator
Diane Gilpin, Founder, Smart Green Shipping: “We welcome the announcement of £960m being committed to support the expansion of clean energy supply chains across the UK as it indicates an understanding of the potential of green growth and its benefit to the UK economy. But when we’re talking about major infrastructure projects such as carbon capture, upgrading electricity networks or developing offshore wind capacity, it’s a drop in the ocean for what’s actually needed. Innovation in climate technologies is happening outside of the UK, leaving us as a follower rather than a leader. We possess the talent and skills to make the UK a pioneer of novel and transformational solutions but that will only happen if the Government provides the right support”.
AI investment
David Strong, Partner at Marriott Harrison: “Many of our VC clients are backing the UK’s best AI-driven companies, so will be optimistic about the UK’s commitment to the sector following today’s announcements of investing £500m and the recent Bletchley Park summit. This will only increase the weighting towards investment in AI companies which we have seen throughout 2023.”
