Towards the end of November, the Chancellor of the Exchequer stood up in the House of Commons to deliver the Government’s Autumn Statement. This is an annual event which provides an update on the Government’s plans for the economy, based on the latest forecasts from the Office for Budget Responsibility. And, in this month’s column, I will attempt to analyse how Jeremy Hunt’s speech is likely to reshape the landscape for small businesses across the UK.
In the face of weak growth, high inflation, and rising interest rates, the Government has unveiled a series of measures with a keen focus on supporting small businesses. So what are the specific implications of Jeremy Hunt’s ‘roadmap’ for steering the UK through the current economic challenges?
National insurance cuts: Boon for small business finances
Among the standout measures is a significant reduction in National Insurance Contributions (NICs). Class 1 NICs for employees will be cut from 12% to 10%, effective from January 6th, 2024. There is also a decrease in the main rate of Class 4 NICs for the self-employed, from 9% to 8%. This starts on April 6th.
These reductions will alleviate financial burdens for both small business owners and their workforces. This move is poised to enhance the financial flexibility of small businesses, thus freeing up resources for growth and innovation.
Capital allowance permanency: Fuelling investment and growth
The 100% upfront tax deduction for UK capital expenditure on plant and machinery will become permanent. This scheme was previously set to end on March 31st, 2026, but by making it permanent it should be a game-changer for small businesses.
This measure will encourage companies to invest in new machinery and equipment, by allowing them to deduct these expenses from their profits. This financial incentive is tailor-made for small businesses looking to modernise and compete in a rapidly evolving market. It should foster growth, technological advancement and longer-term planning.
Extended business rates’ relief: Supports retail, hospitality and leisure
The extension of the 75% business rates’ relief for eligible properties in 2024/25 is a crucial lifeline. This acknowledges the challenges faced by businesses in the retail, hospitality and leisure sectors. Small businesses in these sectors can now breathe a sigh of relief.
And the freezing of the small business rates’ multiplier provides additional support. These measures should help companies to weather the ongoing economic storm.
Freeports and investment zones: Prolonged support for economic hubs
The extension of tax relief in Freeports and Investment Zones is a boon for businesses operating in these regions. This move aims to sustain economic activity and investment, which provides small businesses with a longer duration of support to thrive and compete on a global scale.
Freeze on alcohol duties: A breather for the hospitality sector
The freeze on alcohol duties, until August 1st of next year, is particularly impactful for small businesses in the hospitality sector. By delaying any increase in rates, until the 2024 Spring Budget, demonstrates the Government’s commitment to supporting businesses affected by economic challenges.
This will provide a financial cushion for establishments navigating the world of business during uncertain times.
Welfare reforms and employment: Boost for those hiring employees
The package of welfare reforms, coupled with strengthened work search requirements, aims to increase employment. For small businesses, this should translate into a larger potential pool of skilled and motivated workers. This aligns with the Government’s commitment to making work more rewarding.
An increase in the National Living Wage: Fair remuneration for workers
The National Living Wage rises from £10.42 per hour to £11.44. This is applicable for those aged 21 and over from April 2024. For small businesses, this change signifies an adjustment in labour costs, while emphasising the importance of fair remuneration. Potentially, this should boost employee morale and productivity.
While economic challenges persist, the Autumn Statement seems to indicate that the Government’s fiscal targets for debt and borrowing are on track. Jeremy Hunt’s speech will hopefully spark stability and create a more predictable environment in which small businesses can operate.
The Autumn Statement 2023 is not just a set of policies. It’s a lifeline for small businesses in the UK. As small business owners adapt to changing economic conditions, these recently-announced measures offer both relief and opportunities for growth.
It appears to be evident, by these announcements, that the Government is acknowledging the critical role which small businesses are likely to play in the UK’s economic recovery.