The Spring Statement comes during a perfect economic and fiscal storm, says ACCA UK.
Commenting on today’s Spring Statement, Claire Bennison, head of ACCA UK says:
‘Businesses - especially SMEs - are fighting an intense battle with rising energy costs, impacts on profitability from supply chain delays and uncertainties, a 30 year high in inflation at 6.2%, alongside rising interest rates and a challenging funding landscape for SMEs. All this presents a perfect storm for the UK economy and the lower growth outlook.
‘So while there were many challenges for the Chancellor to address today, at the forefront was support for business, future SME recovery and growth, balancing expenditure against and the of tax rises as costs soar. With household costs also set to rise, this could limit households’ discretionary spending, especially impacting SMEs and the hospitality sector. With the OBR revising up predictions for inflation in 2022, consumer spending power could well be curtailed further as the year progresses. The knock-on effect to the wellbeing and mental health on an already fragile workforce could escalate.
‘However, we welcome the threshold change to April’s hike to the National Insurance rates to fund the Health and Social Care Levy. The change will affect those earning less than to £12,570 and equalises the NICS and Income Tax thresholds.
‘Given feedback from our UK members, we would have preferred a one-year delay to this Levy to create some breathing space for businesses. We still have concerns around the timing of this, particularly because of worsening international tensions which may further affect supply chains, the cost of doing business and which the Governor of the Bank of England has warned may present an additional inflationary risk.
‘In line with our pre-statement representations to the Chancellor, we’re pleased to see the increase to employment allowances which helps SMEs. Elsewhere the statement made headlines on measures to support earners and the rising cost of living, though there may be some light relief for businesses which were promised further support on innovation and investment at the Autumn Budget. It is vital that government consults with business in good time ahead of this to provide certainty on investment schemes and ensure eligible activities and products under capital allowances and initiatives such as Help to Grow properly reflect business activity and needs.
‘In conclusion, the Chancellor has tried to find manoeuvrability to tackle rising costs and increase the UK’s growth rate. We would have hoped for a little more to support individuals and businesses to cope with high costs and tax increases they face.
‘But as the Chancellor says, tax cuts need to be paid for and the future promise to cut the basic rate of income tax may go some way to do that - but it’s not a panacea. It’s clear that thresholds are not keeping up with inflation and so this needs careful monitoring with strong policy decisions going forward and announced at the Autumn Budget.’
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