Industry reacts: Spring Budget 2023 and full expensing scheme
Thursday, March 16, 2023
Chancellor Jeremy Hunt’s first full budget has been welcomed by British print associations as a positive step toward revitalising the UK economy, but not everyone in the industry is impressed.
The budget, announced yesterday (15 March), saw Hunt reveal a range of measures to promote economic growth and encourage the return of older workers, while continuing with the planned increase to corporation tax to 25% and reduction in public spending.
Key for industry, however, was the introduction of a ‘full expensing’ scheme for businesses. Between April 2023 and March 2026, companies will be able to claim 100% first-year relief on their plant and machinery expenses — with no cap.
Replacing the 130% super-deduction introduced in the pandemic, the new scheme will run alongside a 50% first-year allowance for new special rate assets — such as electric wiring or solar panels — and companies’ Annual Investment Allowance (AIA), which provides 100% first-year relief on plant and machinery, capped at £1m.
Brendan Perring, general manager of the IPIA, was enthusiastic about the scheme’s potential and its significance as the first notable support package for industry in the UK, unrelated to Covid, for many years.
Speaking to Printweek, he said: “I think it’s seismic for our industry. It is the exact shot in the arm — we need lots of things in this industry, but this particular policy is a major step forward in terms of the government proving that it wants to invest in manufacturing industries in our country.
“I believe that it will significantly restore the confidence of the UK’s biggest technology developers and manufacturers, and will make a tangible difference for many print businesses that need to upgrade their equipment and technology.”
Perring said that he had met many European print bosses at the recent Hunkeler Innovationdays event in Switzerland who were specifically looking to invest in machinery thanks to policies similar to, but less generous than, the full expensing scheme.
He added: “The government has listened to advice from industry stakeholders, and now that it has been translated into actual policy for the long term, I think that will help push the sector’s confidence back in the right direction.”
Charles Jarrold, chief executive of the BPIF, was more cautious in his praise of the scheme.
He said: “We have repeatedly encouraged the government to implement policies that encourage investment, so, with the ending of the “super-deduction”, it’s absolutely right to support investment by continuing with full expensing.
“Whether this will be enough to encourage businesses to invest in tough times remains to be seen.”
Paul Manning, managing director of London-based sustainable printer Rapidity, also questioned the scheme’s potential for supporting smaller businesses.
“When I look at that budget, I just wonder: what is in that for an SME?
“They’re confirming that corporation tax has gone up to 25%, that the super-deduction has gone — and we had the million pound AIA anyway [since 2019].”
Manning said the full expensing scheme, with no cap, amounted to being just another tax break for large companies, pointing out that many of the UK’s largest companies, such as Amazon or Shell, pay little or no corporation tax anyway.
He added: “A small business just isn’t going to benefit [more than under the previous allowance] unless it’s going to invest more than a million pounds next year.
“Obviously there are medium-sized printers who do that sort of thing — but I’m sure the majority of printers aren’t at the level where they are investing more than a million pounds in kit and machinery in a single year.”
Martin McTague, national chair of the Federation of Small Businesses, agreed the full expensing scheme had left small businesses behind.
Commenting yesterday, he said: “Today’s budget will leave many feeling short-changed. The distinct lack of new support in core areas proves that small firms are overlooked and undervalued.
“On business taxes, the budget spends £27bn extra [through the full expensing scheme] 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 - trickledown economics here simply does not work.”
The budget included several other support measures for business.
While no changes to the Energy Bill Discount Scheme will be made, the government has extended the Climate Change Agreement scheme, whereby printers can agree an energy and carbon emission reduction plan with the Environment Agency and receive a discount on their Climate Change Levy bill.
Jarrold said: “We were disappointed that there won’t be any changes to the upcoming Energy Bills Discount Scheme, which is unlikely to ever be put to use. Alternatively, this money could have been ring-fenced for energy efficiency incentives, but that opportunity has been missed.
“On the other hand, we were pleased to see that the print sector remains eligible for the Climate Change Agreement for another couple of years. This had been under threat, and was one of our Priorities for Print, so we are delighted the government has listened.”
Perring added that the Climate Change Agreement was a key tool for the sector.
Wednesday’s budget announcement also included a number of measures intended to boost workforce participation. This will see free childcare provided to children aged nine months to three years, and older people encouraged back to work with funding for mid-life training.
Jarrold added: “The measures to get more people working, and remaining in work, are welcome. Improving upskilling and retraining will support this, but we must ensure it’s done in consultation with employers who know best when it comes to their employment needs.
“The new apprenticeships for the over-50s sound promising; we certainly plan to have a say in how they’re designed and delivered.”
In all, said Dominic Hartley, commercial director for multi-discipline printer Lexon Group, the budget was neither particularly exciting nor disappointing.
He told Printweek: “It wasn’t anything we didn’t expect. At the end of the day, Covid and the Ukraine war has cost the UK billions [in borrowing], and we have to pay it back.”
Calling the full expensing scheme “a watered down version of the super-deduction”, he added that many companies that were in a position to invest had already taken advantage of the super-deduction, and would be unlikely to invest again soon.
Hartley welcomed the continuation of the Climate Change Agreement scheme: “Any help towards investing in sustainable energy is a good thing.
“But the reality is, it's going to be a painful few years, and it always was, after the pandemic. I suppose the thing I’m pleased with, really, is that it’s unlikely we are going to go into recession — and we might actually see some growth in the next couple of years.”
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