The Spring Budget and its impacts on procurement

UK budget criticised for lack of support for small businesses & energy costs but aims for long-term growth & investment, with implications for procurement

The UK budget has faced criticism from business groups for not offering enough support for energy costs and labor shortages.

As a result, many small businesses are “feeling short-changed”, according to the Federation of Small Businesses (FSB) and Logistics UK.

The FSB's national chair, Martin McTague, said: “The chancellor set high expectations for supporting small firms during these challenging times, but today’s budget falls short. The lack of new support in key areas shows that small businesses are being overlooked and undervalued. With billions of pounds being allocated to big businesses and households, small businesses and their 16 million employees will be wondering why they have been left out.”

Logistics UK expressed disappointment with the budget, while the FSB pointed out the “distinct lack of new support”. Chancellor Jeremy Hunt, however, said he was “proving the doubters wrong” despite the “enormous challenges” faced by the UK economy.

Hunt's budget focuses on “four pillars”: employment, enterprise, education, and everywhere. He said: “Today, we deliver the next part of our plan: a budget for growth. Not just growth from emerging out of a downturn, but long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people, all while making our country one of the most prosperous in the world.”

Hunt aims to remove obstacles that prevent businesses from investing, tackle labor shortages, break down barriers to employment, and leverage British innovation to create a science and tech superpower.

The Office for Budget Responsibility predicts that the UK will not enter a technical recession and expects inflation to fall to 2.9% by the end of 2023. Hunt concluded by stating: “Declinists are wrong and the optimists are right.”

How the budget affects businesses and procurement:

Logistics

The government announced that fuel duty will remain at current levels for the next year.

Paul Hollick, Chair at the Association of Fleet Professionals, expressed disappointment that there was little content showing that the government had thought about business road transport. Nevertheless, he welcomed the freeze in fuel duty as an increase would have been unwelcome during a time when the economy is struggling.

David Wells, Chief Executive of Logistics UK, also welcomed the freeze in fuel duty but expressed dismay over the lack of support for businesses with energy costs and the transition to a low-carbon economy. He viewed this as a missed opportunity and called for urgent clarification on the proposed reformed HGV road user levy.

Energy costs

While the UK government has pledged to continue support for domestic energy costs, it has remained silent on the issue of industrial energy support after the Energy Bill Relief Scheme concludes in March.

According to Martin McTague, the national chair of the Federation of Small Businesses (FSB), “We’ve got a budget that on energy helps households but not small firms. On business taxes, it spends £27bn extra on big businesses, arguing that small businesses are already catered for. This will lead to a feeling of being left behind instead of being considered equal partners in economic recovery – trickle-down economics here simply does not work.”

Shevaun Haviland, director general of the British Chambers of Commerce, added that “Almost half of businesses have told us they will struggle to pay their energy bills from April, and they cannot invest when they are fighting to survive. There is little in today’s announcement that will provide comfort to these firms.”

Tax Changes

The UK government has announced significant changes to tax laws in its latest budget. A new full capital expensing program will be introduced for the next three years, with the intention of making it a permanent fixture.

This initiative will enable companies to write off the complete cost of qualifying investments in plants and machinery in the year they are made.

However, there is also some bad news for businesses: corporation tax will increase from 19% to 25% starting from April 2023.

Shevaun Haviland, the director general of the British Chambers of Commerce, commented on the changes, saying, "While the plans for full capital expensing are a positive move, it remains to be seen how it will impact businesses compared to the Super Deduction scheme. The rise in corporation tax will also be a cause for concern among many companies."

Investment Zones

The UK government has announced plans to launch 12 investment zones across the country with the aim of stimulating growth in key future sectors and encouraging local investment. These zones will provide interventions worth £80m over five years, including tax relief and grant funding.

Commenting on the announcement, Simon Geale, Executive Vice President of Procurement at Proxima, said: “The investment zones, R&D initiatives and climate incentives all point towards future-proofing the workforce and schemes designed to remove barriers to entering or staying in work. They are very much about sparking growth in the present.

“While broad and fairly moderate in places, this budget looks like it is all about removing barriers for businesses and individuals while providing some moderate incentives for investment, particularly in high-tech and climate. Even so, we should proceed with caution and wait to see how realistically businesses will adapt to the needs of the new workforce and that the provided schemes will produce the desired results.”

Labour Shortages

The government has introduced initiatives to address labour shortages, including support for disabled individuals to enter the workforce and retraining programs for those over 50.

The budget includes "returnerships" and sector-based work academies aimed at helping the over 50s return to work. However, some critics argue that the proposals for individuals with health conditions are poorly designed and won't be effective, and that small businesses need more support to recruit those locked out of the labour market.

While measures to subsidize occupational health are welcome, they are not seen as sufficient to address the issue.

While pleased with the skills bootcamp model, critics view the measures aimed at the over 50s as token efforts at best.

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