Today, the chancellor of the exchequer, Philip Hammond, laid out his plans for the future of the UK economy in the Autumn Budget 2017. With Brexit, the deficit and public services and welfare all under the microscope, the chancellor offered a “balanced budget to prepare the UK to tackle the challenges of Brexit head-on.
The budget, while tempered and criticised for being ‘boring’, offers the UK a glimpse into what the nation will be like after Brexit. Mr Hammond jabbed and prodded at the Labour party over inherited economic problems, while offering a chance to reduce borrowing and make the average British life easier with a healthy dose of conservative realism.
The biggest takeaway from the budget would be the slashed forecast in growth. The OBE growth forecast for 2017 was reduced retrospectively from two per cent to 1.5 per cent, with GDP reduced to 1.4 per cent, 1.3 per cent and 1.5 per cent in subsequent years before rising to 1.6 per cent in 2021-22.
Productivity growth and business investment also revised down from previous estimates. On a slightly brighter note, another 600,000 people are set to be in work by 2020 to help contribute to the economy.
In response to the Autumn Budget 2017, Simon Browning, tax partner at UHY Hacker Young in Nottingham, says, ‘With the cloud of Brexit hanging over us, it is worrying to see the reduced productivity and growth forecasts as low as 1.3 per cent and 1.5 per cent over the coming years. Wage inflation could be limited as a result of this and it will have a knock-on effect in terms of business confidence.’
Ed Molyneux, CEO and co-founder of FreeAgent, adds, ‘It’s important to note that the UK’s growth forecast has been slashed, which is a clear indication of the economic uncertainty we are currently facing as we get closer to our exit from the EU.
‘Our own research has found that 70 per cent of UK micro-businesses think that Brexit will have a negative impact on the economy – with half believing the economy will get worse over the next six months – so there is obviously a lot of concern within this sector. The Budget is therefore a missed opportunity to provide some much-needed relief and reassurance to these five-million business owners, who make up the backbone of the economy.’
The announcement focused heavily on the potential ladder that technology offers Britain after Brext, allowing them to move into other markets and exploring entirely new opportunities.
James Kitching, solicitor in the corporate team at Coffin Mew, says, ‘This was very much the budget for tech, start-ups, and scale ups. However, the development of new technologies, such as autonomous cars and AI, is very much at the mercy of our legal and regulatory systems.
‘Already there are issues with how fast these kinds of ideas can advance while there are questions about insurance and liability. While producing an environment for greater investment in future technologies is a start, the law needs to adapt to allow our nation to lead the way.
‘There is talk of making a friendlier regulatory environment but with the fast pace of change, this needs to happen sooner rather than later. Hopefully Philip Hammond and the government recognise this and the ideas in the budget are a start of greater things to come.’
Agreeing with this sentiment, David Galsworthy, CEO and co-founder of Techspace, says, ‘Today’s move by the government is critical for the growth of scaling technology companies in the UK in the coming years.”
“After the Brexit vote there’s been a lot of uncertainty around what would replace the European Investment Fund. With the promise of a new £2.5 billion investment fund, the government is seeking to help the UK’s scale up companies bridge the funding gap and help them grow into the next technology unicorns.
“This is welcome news in a post-Brexit UK tech economy.”
The governments choice to abolish Stamp Duty for all first-time buyers for properties up to £300,000 is a welcome relief for some.
If you’re buying a house for £200,000 you will currently pay £1,500 in stamp duty. From midnight tonight, if you’re a first-time buyer, you will pay nothing.
However, the Office for Budget Responsibility predicted that would increase house prices by an average of 0.3 per cent by this time next year.
That means a £200,000 house will become £200,600. So you might save £1,500 in stamp duty but that saving will be reduced to £900 because you’re having to pay more for the property.
Tim Walford-Fitzgerald, private client tax partner at the chartered accountants HW Fisher & Company, comments, ‘Buy-to-let landlords could be forgiven for pinching themselves. For once they’ve not been the whipping boys of a Budget.
‘After years of being portrayed as the villains of the property market, they’ve escaped further unwanted attention from a Chancellor who has instead chosen to focus on the housing market’s fundamentals rather than seeking scapegoats.
‘Such a huge stimulus for the property market – both the immediate cut in Stamp Duty and the long-term largesse for housebuilders – should inject some life into a market that has been weighed down by weakening sentiment and falling real wages.
‘But the ‘trickle up’ theory, that firing up first-time buyers is the key to lifting the market as a whole, is far from infallible – and the OBR’s increasingly doom-laden economic outlook could reduce its impact.
‘If people’s real wages are falling and property prices remain out of reach, the prospect of saving a few thousand Pounds on Stamp Duty will do little to help would-be buyers save enough for a deposit.’
Personal taxes and wages
The Chancellor announced a further increase in the Income Tax personal allowance to £11,850 and £46,350 for higher rate tax payers, from April 2018. The National Living Wage will also increase to £7.83 per hour in April 2018.
Richard Godmon, tax partner at accountancy firm, Menzies LLP, says, ‘The increase in Income Tax personal allowances will benefit all tax payers but low earners will feel the benefit more than most. However, further increases in the National Living Wage will put pressure on employers in the retail and hospitality and leisure sector.
‘These employers have seen wage costs rise significantly recently due to concerns about the supply of labour due to Brexit and this increase could potentially lead to some job reduction.’