The Autumn Statement didn't go far enough to help businesses -that's the message from many in the West Midlands as the region digested the latest moves by Chancellor Jeremy Hunt to curb inflation and help the economy to grow.
The Chancellor vowed to put the UK on the path to stability as he announced tax increases and spending cuts. But the UK has slumped into recession, with the economy expected to shrink 1.4% in 2023.
Inflation is expected to be 9.1% over the course of this year and 7.4% next year, meaning the cost of living crisis will go on. And it's been estimated that a majority of UK households will be worse off as a result of today's announcements.
Corin Crane, chief executive at the Coventry and Warwickshire Chamber of Commerce, said: “Most of these announcements are based beyond the next election where a lot of the difficult decisions on tools for growth – such as long-term funding in infrastructure and apprenticeships – are being pushed beyond the life of this government.
“This is all at a time when businesses are grappling with a cocktail of issues that are putting increasing pressures on their outgoing costs – such as a broken business rates system, rising energy bills, and spiralling wage demands in a bid to fill vacancies.
“The business rates system is outdated and broken – as it is out of touch with the economic realities that companies are facing – and so while we welcome the support package in this area, the speed, accuracy and business-focused recommendations of next year’s rates review could make or break thousands of businesses.
“The budget hasn’t really helped to address the long-term issue that businesses are having with filling skilled vacancies, and further clarity is needed from the government on how this generational problem is going to be addressed.
Investment zone change 'potentially very exciting'
In his speech on Thursday, the Chancellor pledged to make the UK "the world’s next Silicon Valley" and said he wanted to “combine our technology and science brilliance with our formidable financial services”.
The investment zones announced under Liz Truss are being scaled back. Mr Hunt said the zones would now “focus on leveraging our research strengths, to help build clusters for our new growth industries”.
Mr Crane added: “That said, I am glad the commitment to investment zones still stands at a time when our need for a UK Gigafactory based in Coventry and Warwickshire is critical, and we hope progress here is now quick and commercially focused.”
Jessica Bowles, Director of Strategy at Innovation Birmingham campus developer Bruntwood, said: “It’s been well trailed that investment zones as they were previously conceived would go. They were uncosted and unlikely to have boosted growth in a sustainable way.
“The idea of replacing them with something focussed on the research strengths of universities and knowledge-intensive growth clusters is potentially very exciting, particularly if aligned with the Chancellor’s pledge to help turn world class ideas into world class companies. The intention to work with local partners and make decisions in the Spring is a sensible approach to getting the best outcomes for our regional cities and the UK as a whole.”
Hospitality sector 'left to wither and die'
Businesses and representatives from the nighttime economy sector have demanded more support for businesses that were badly damaged by pandemic lockdowns and are now dealing with the cost of living crisis.
Peter Connolly, director of Nortons Digbeth in Birmingham, said PM Rishi Sunak and his Cabinet had “all but left the hospitality industry to wither and die as a result of a declining market and consumer confidence.”
He said: “Hospitality businesses who have survived a pandemic with two national lockdowns and the impact of the UK leaving the EU just cannot increase budgets in line with inflation.
“It is disappointing but entirely unsurprising that the Chancellor today has made very little mention of support for the hospitality business. We are no clearer, no better off than we were after the September ‘kamikaze’ budget.
“Disappointingly there was no mention of any of the measures that hospitality bodies such as Night Time Industries Association, British Beer and Pub Association and UK Hospitality have been long asking for; a continuation of the business rates freeze, 10% VAT for hospitality (more in line with European counterparts), and access to government-backed finance to improve liquidity.
“Where are the finance and investment options for the growth the Chancellor and Conservatives champion so much - and COVID loan repayment extensions?
“Failing to freeze business rates will leave many on the brink – essentially slowly killing off a huge swathe of the UK’s pub culture, from city centre bars to rural community pubs. The price of pints simply cannot rise in line with inflation or to absorb other costs."
'Austerity 2.0' leaves firms facing tough decisions
Simon Peacock, Head of Regions at JLL, said: “Investment zones may not have delivered what was suggested in the ‘mini-budget’, but they were an idea of some promise and at least worthy of exploration.
"Many will feel disappointed by their scrapping. As we look ahead, we await details for the university-focussed scheme that will replace them and hope it will come to the fore before the next Budget to support local authorities."
Mr Peacock added: “I think the UK’s regional cities will rightly feel nervous about the onset of ‘Austerity 2.0’ in today’s Autumn Statement, given that the scars of the last round have barely been healed by the stop-start nature of the Levelling Up agenda.
“Clearly, given the financial crisis caused by the markets’ fear that the UK had lost its sense of fiscal responsibility, there was a need to restore trust today. But with few initiatives to boost growth and a slower rise in capital spending, the public sector is going to find it much harder to play an active role in local regeneration projects.
“Cuts to budgets force Government departments and local authorities to make really hard decisions that ultimately reduce the people and capacity available to deliver on growth and renewal in our regions.”
Levelling up is 'work in progress'
James Brown, Practice Leader, Grant Thornton UK LLP in the Central region said: "With inflation at a 41-year high and casting a shadow over the economy, today's Autumn Statement was always going to be focused on trying to fix the state of the nation's finances with a package of tax hikes and spending cuts.
"That said, all the tax changes were heavily trailed and the emphasis on energy security, infrastructure and research and development as drivers of growth will be welcomed across the Midlands.
"Many of us will be pleased to see the commitment to invest in HS2 rail staying high on the agenda. The acknowledgement that regional devolution is a key lever of growth was good to hear too, with particular praise for the West Midlands Mayor Andy Street's 'civic entrepreneurship'.
"We look forward to learning more about the new 'trailblazing" devolution deals between the Government and key cities like Birmingham. Levelling-up our economy remains very much a work in progress with many people in our region struggling amid the current cost of living crisis."
Electric vehicles to lose VED exemption
Mr Hunt announced that zero-emission vehicles will lose their vehicle excise duty (VED) exemption from April 2025.
Mike Hawes, chief executive at the Society of Motor Manufacturers and Traders, said, “We recognise that all vehicle owners should pay their fair share of tax, however, the measures announced today mean electric car and van buyers – and current owners - will face a significant uplift in VED.
"The sting in the tail is the VED supplement which will unduly penalise these new, more expensive vehicle technologies. The introduction of taxes should support road transport decarbonisation, and the delivery of net zero, rather than threaten both the new and second-hand EV markets.
“With a zero emission vehicle ( ZEV ) mandate on the way for car and van manufacturers, we need a framework that encourages consumers and businesses to buy electric vehicles. We look forward to working with government on how to transition the market and ensure the tax framework on road users supports this objective.”
'No pain, no gain' - households will continue to suffer
Prof Adele Atkinson, professor of practice in financial literacy and wellbeing at the University of Birmingham, said: “Jeremy Hunt has delivered a budget designed to slow inflation and return the country to growth. The approach that he has taken is consistent with the sporting mantra of ‘no pain, no gain’, and it appears that despite some targeted support, many households will continue to suffer.
“There is some relief for pensioners and people living on means-tested benefits, disability benefits or state pension, with the confirmation that their income will rise in line with inflation and be topped up with cost-of-living payments. Rent caps in the social rented sector will also help some, but many renters and buyers remain vulnerable to rent and interest rate increases.
“The chancellor has also announced that both National Insurance and the lower tax thresholds will be frozen, and threshold for higher tax will also be brought down. This approach to raising tax revenues will have a particularly negative impact on the lowest paid who may find themselves moving into the lower tax band for the first time.
"When people pay more tax, their spending power reduces. This may curb demand and therefore slow inflation. But it’s impossible (not to mention morally abhorrent) to reduce demand in households that are already cutting out essentials. In such situations, it is highly plausible that the overall impact of a tax increase combined with high prices will be to put pressure on wages and actually increase inflation, particularly given the continued labour shortages across our economy.
"And whilst the chancellor has promised ongoing - but reduced - help with energy bills beyond April 2023, he still has not explained how he expects ordinary households to put food on the table this winter.
"Neither has he provided hope for our local businesses trying to stay afloat despite the endless stream of challenges they have faced in recent years. They will be hard pressed to find customers with money to spend for the foreseeable future. "
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