Budget 2018: Generally positive but could have been better for South Wales

Giving her reaction to the Autumn Budget 2018, Heather Myers, Chief Executive of the South Wales Chamber of Commerce, said:

 “In an atmosphere of unprecedented uncertainty and heightened political noise, the Chancellor has attempted to listen to business concerns, but with many of his key announcements in devolved areas he could have gone further to give a much needed boost to the Welsh economy.

“Crucially, the Chancellor has avoided major increases to business tax to fund the government’s spending priorities, which would have undermined the confidence boost to firms from his commitments to supporting enterprise and growth.

“We are delighted that the Chancellor has listened to the voice of Chambers of Commerce and has boosted the Annual Investment Allowance to £1million. This will be a huge shot in the arm for businesses across the country, giving many thousands of firms renewed confidence to invest and grow.

“We, along with FSB Wales, argued that Air Passenger Duty should be devolved to Wales This would allow Cardiff Airport to enter the competitive market even further and attract more international flights, to really put Wales on the international map as we chart our course beyond Brexit. It was therefore disappointing that APD wasn’t devolved, particularly as the Chancellor did announce that he was consulting on devolving short-hall APD to Northern Ireland, where long-haul APD is already devolved.

‘With measures such as reductions in Business Rates, investment in road maintenance and the provision of full fibre internet in rural areas only applicable for England, it does mean that there will be an additional £550m for the Welsh Government to spend over the next three years. We would urge the government to use this money to continue its Business Rates relief programme and invest in our infrastructure, the M4 Relief Road and digital connectivity being the priorities.

“While the Budget measures were largely positive for business, the final and most important piece of the jigsaw is a comprehensive Brexit deal that gives firms the clarity and precision they need. The measures announced in the Budget will only yield their greatest possible results when paired with a Brexit deal that delivers certainty on the UK’s future terms of trade beyond March 2019.”

 

Suren Thiru, Head of Economics at the British Chambers of Commerce also commented:

On raising the Annual Investment Allowance:

“Increasing the Annual Investment Allowance to £1m was the central ask of the BCC and we’re delighted the Chancellor has listened to our call for bold measures at this time of uncertainty. This announcement will provide a major enticement for firms to invest and grow. It will give companies across the UK the confidence to push ahead with investments in plant & machinery, property and staff training.

“We are also pleased that the Chancellor delivered on our call to incentive investment in new buildings through a 2% capital allowance.”

 

On the VAT threshold:

“We are pleased that the Chancellor listened to our call to keep the VAT threshold unchanged over the near term, providing much needed certainty to firms across the UK. Against a backdrop of Brexit uncertainty and the rising cost of doing business, a reduction in the VAT threshold could well have proved to be a tipping point for some of our most promising young firms.”

 On the digital services tax:

“While businesses understand the need to build a tax system fit for the future, the government must tread very carefully in introducing a digital services tax. Tight classifications of exactly which businesses will fall under the scope of these new rules are important to avoid unintended consequences or confusion for the industry as a whole. The government must work closely with business and international partners as this evolves to ensure the UK can continue to compete effectively on the global stage. We welcome the Chancellor’s acknowledgment of the challenges, and look forward to engaging with the government on this.”

On the introduction of Making Tax Digital:

“We are disappointed that no action was taken to alleviate the impending administrative and cost burden associated with the implementation of Making Tax Digital, despite low business awareness of this change and the deadline coinciding with the UK’s departure from the EU. With only a few months to go before its introduction, we would urge the government to look again at the pressures that Making Tax Digital is placing on firms at a time of significant change.”

 

On the latest forecasts by the Office for Budget Responsibility:

“Despite the upgrades, the OBR’s latest outlook paints a rather subdued picture of the UK’s economic prospects over the near-term with growth expected to remain well below its long-run average throughout the forecast period. Significantly, the OBR’s latest forecast implies that by 2020 the UK economy will have experienced its second weakest decade of average annual GDP growth on record.

“The OBR’s latest economic forecast also implies that UK growth will remain unbalanced with a continued reliance on the services sector and consumer spending to drive growth. In contrast, net trade’s contribution to overall economic growth is forecast to remain limited. Measures such as the increase in the Annual Investment Allowance however will help to lift business investment over the near term.

“As expected, the OBR has confirmed that the UK’s fiscal outlook is healthier than they expected in their previous forecast. However, if UK economic growth remains subdued, the UK’s ability to generate tax receipts may prove more of an uphill struggle than the OBR currently expects. More needs to be done to strengthen and widen the UK’s tax base, including for firms looking to invest, recruit and grow their business.”

 

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