Spring Budget 2023: What Does it Mean for UK Industries?

On 15 March 2023, Chancellor Jeremy Hunt delivered the Spring Budget 2023. It concentrates on delivering three of the Prime Minister Rishi Sunak’s five priorities: halving inflation, growing the economy and reducing debt. Key announcements focus on energy support, levelling up, business investment and boosting employment.

The Chancellor also laid out the latest economic and fiscal forecast by the Office for Budget Responsibility (OBR), with the key takeaway being that the UK looks set to avoid a recession in 2023.

The spending watchdog’s forecast paints a more positive picture for the UK economy in 2023 compared to recent forecasts by the IMF and by Goldman Sachs; after all, the UK remains the only G7 country that has yet to recover to pre-pandemic output levels.

The OBR forecasts GDP to contract by 0.2% in 2023, followed by growth of 1.8% and 2.5% in 2024 and 2025, respectively.

In contrast, the bleak Autumn Statement forecast a 1.4% drop in 2023 and growth of just 1.3% in 2024.

The independent watchdog also forecasts inflation to fall to 2.9% by the end of 2023, from 10.7% in 2022, which is welcome news to the millions of UK households battling the cost-of-living crisis. In the Budget, the government laid out £94 billion of support (£3,300 per household on average) across this financial year and next to support households with higher costs.

Taxes

• The government is freezing fuel duty and the 5p cut to fuel duty on petrol and diesel is extended until April 2024. This will save the average driver £100 next year.
• Alcohol duties will rise in line with inflation from August 2023, though the government is providing new reliefs for beer, cider and wine sold in pubs. Draught Relief for beer and cider will rise to 9.2%, from 5% and from 20% to 23% for wine and spirits. Draught drinks will be 11p cheaper in pubs than in supermarkets.
• From 15 March 2023, tobacco duty rates will increase by 2% above inflation, while the rate on hand-rolling tobacco will rise by 6% above inflation.
• The Lifetime Allowance charge will be removed from April 2023 and then completely abolished from April 2024. The tax-free pension Annual Allowance will be raised to £60,000, from £40,000. This is hoped to encourage more workers over the age of 50, including high-skilled employees like NHS clinicians, to reconsider leaving the labour market.
• As previously announced, from 6 April 2023, the corporation tax is rising from 19% to 25% on profits over £250,000. Businesses with profits between £50,000 and £250,000 will pay between 19% and 25%, while for those with profit under £50,000 the rate remains unchanged.

Industries most affected:

• Pubs & Bars
• Wine Bars
• Tobacco Product Wholesaling
• Petrol Stations
• Supermarkets
• Hospitals

Energy

• The Energy Price Guarantee (EPG) will be maintained at its current £2,500 per year level for an additional three months (April to June 2023), with the planned increase to £3,000 per year delayed from 1 April to 1 July.
• The Energy Bills Discount Scheme will provide eligible businesses with a discount on high energy bills until 31 March 2024, following the end of the current Energy Bill Relief Scheme.
• Additional support was announced to ensure that domestic heat network customers and those using pre-payment meters don’t face disproportionately high costs compared with direct-debit consumers under the EPG.
• The government will provide up to £20 billion funding for early deployment of carbon capture, usage and storage.
• The government is launching Great British Nuclear to support new nuclear builds. Nuclear energy will also be included in the green taxonomy, encouraging private investment.
• Public swimming pools in England will receive over £60 million of support to address cost pressures and help with future energy efficiency, while charities and community organisations will receive over £100 million for services and energy efficiency.

Industries most affected:

• Charities
• Electricity Supply
• Gas Supply
• Electricity & Telecommunications Infrastructure Construction

Businesses and levelling up

• Businesses will receive new capital allowances; from April 2023 until April 2026, company investments in plant, machinery and IT equipment will be expensed in full from taxable profit. Companies investing in special rate assets will benefit from a 50% first-year allowance. According to the Chancellor, this policy is equivalent of a corporation tax cut worth an average of £9 billion a year, and will lead to a 3% increase in business investment a year.
• From April 2023, SMEs that spend 40% or more of their total expenditure on R&D will be able to claim a higher payable credit rate of 14.5%. Eligible loss-making companies will be able to claim £27 for every £100 of R&D investment.
• The government has announced 12 Investment Zones, including four across Scotland, Wales and Northern Ireland. Each zone will drive growth and bring investment to the local region. English Investment Zones, which include West Midlands, Liverpool and Greater Manchester, will have access to interventions worth £80 million each over five years.
• New “Levelling Up Partnerships” have been announced, with 20 areas across England provided with investment worth over £400 million.
• The Chancellor announced simplifications to trade customs, including an extension to declaration deadlines, and a review into opportunities to reduce paperwork for international traders.

Industries most affected:

• Biotechnology
• Alternatively Fuelled Vehicle Manufacturing
• Renewable Electricity Generation
• Software Development

Other key announcements

• The government is providing £200 million in funding for 16 regeneration projects, alongside an additional £200 million given to local councils in England in 2023-24 to improve road quality and repair potholes.
• Defence spending is getting a boost, with the government committing an extra £4.95 billion over 2023-24 and 2024-25. The long-term target for the government is to invest 2.5% of GDP in defence.
• An investment of around £900 million into an exascale supercomputer and Artificial Intelligence Research Resource.
• From 2024, the Medicines and Healthcare products Regulatory Agency will have a swift approval process for new medicines and technologies, with £10 million in extra funding over the next two years to accelerate patient access to treatments.
• The government is easing immigration requirements for five roles within the construction sector to help with the labour shortages.
• Provision of 30 hours a week of free childcare for 38 weeks a year, for eligible working parents (both parents working at least 16 hours a week) of children between 9 months and 3 years of age, which will be rolled out in phases from April 2024.
• Universal Credit changes were introduced, with claimants able to receive childcare funding upfront instead of in arrears. Additionally, the maximum potential benefit for parents will be increased to £951 for 1 child and £1,630 for 2 children.
• Free nursery places are getting a £204 million funding boost from September 2023, followed by £280 million next year to help deliver free childcare hours in England.
• People out of work that claim Universal Credit will be provided with additional support to find employment or increase their hours, by raising Work Coach support and work search requirements. The government is also introducing a new Universal Support programme to support people with disabilities and long-term sickness into work.

Industries most affected:

• Road & Motorway Construction
• Construction Contractors
• Pre-Primary Education
• Child Day-Care Centres
• Employment Placement Agencies

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