Growth was the main topic of today’s Spring Budget announcement by Chancellor Jeremy Hunt with the UK expected to avoid a technical recession this year, according to the Office for Budget Responsibility.
Inflation is set to fall to 2.9% by the end of the year, down from 10.7% in the last quarter of 2022.
In his second fiscal statement since becoming Chancellor, Hunt’s announcements included introducing 12 new investment zones, confirming a rise in corporation tax to 25%, introducing over-50s apprenticeships, increasing small business Annual Investment Allowance to £1m, and freezing fuel duty for the 13th consecutive year.
Hunt also said nuclear energy is to be classed as “environmentally sustainable” for investment purposes and promised more public funding, as well as committing to invest £20bn over the next 20 years in low-carbon energy projects.
Immigration rules are to be relaxed for five roles in the construction sector to ease labour shortages, and paperwork for international traders is to be reduced.
The new investment zones will be in the West Midlands, Greater Manchester, the North East including Teesside, South Yorkshire, West Yorkshire, East Midlands and Liverpool, with at least one each in Scotland, Wales and Northern Ireland too.
Each investment zone will receive £80m of support over the next five years.
To be chosen, each area must identify a location where they can offer a “bold and imaginative partnership between local government and a university or research institute in a way that catalyses new innovation clusters”.
If successful, the zones will have access to £18m of support for a range of interventions including skills, infrastructure, tax reliefs and business rates retention.
Working with Levelling Up Secretary Michael Gove, Hunt said he would like to give further support to levelling up areas including over £200m in high quality, local regeneration projects across England.
This will include Tipton town centre and the Marsden New Mills scheme.
A further £161m was announced for regeneration projects in mayoral combined authorities and the Greater London Authority, as well as over £400m available for new levelling up partnerships including in Redcar and Cleveland, Blackburn, Oldham, Rochdale, Mansfield, South Tyneside and Bassetlaw.
A second round of the city region sustainable transport settlements was also announced, with £8.8bn allocated over the next five years, as well as £200m to fix potholes next year.
As planned, corporation tax is to increase from 19% to 25%.
Firms which make a profit of more than £250,000 will pay 25% tax on their profits from April.
Hunt says only 10% of companies will pay the full 25% rate.
For smaller businesses, the Annual Investment Allowance has been increased to £1m, meaning 99% of all businesses can deduct the full value of all their investment from that year’s taxable profits.
Hunt added he’s introducing “full expensing” for the next three years with an intention to make it permanent.
He says it means that every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits.
Small or medium-sized businesses will be able to claim a credit worth £27 for every £100 they spend if they spend 40% or more of their total expenditure on research and development.
The Budget included abolishing the cap on the amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax (it is currently £1.07m); and the tax-free annual allowance for a pension pot is to rise from £40,000 to £60,000 (it had been frozen for nine years).
A big focus of the Budget was getting more people back into work and one of the schemes outlined was introducing more places on “skills boot camps” to encourage over-50s who have left their jobs to return to the workplace.
Stephen Marcos Jones, CEO of the Environmental Industries Commission (EIC), said: “The Chancellor has today made a series of big financial calls for the year ahead, particularly with a view to dealing with inflation and driving economic growth.
“In advance of the Budget, the EIC made clear that a clear focus on the green economy and infrastructure is vital to the UK’s economic and social recovery and should be essential elements of the statement.
“We know too well the importance of regional growth to overall UK growth. With that in mind, we welcome the announcement on the expanded devolution deals, but await to see how the new investment zones will be rolled out.”
He added: “The relationship between these new zones and pre-existing clusters, and freeports, will need to be made clear so the sector can plan accordingly and deliver a joined-up approach that makes the most of available funding.
“There were very few surprises in the Budget with regards to climate, with many of the announcements focused on industrial clusters, and carbon capture.
“However, details on capital allowances are significant and will be an important step in supporting net zero projects.”
He added that in the days leading to the Budget, EIC issued a warning that the UK’s reputation for delivering large-scale construction and infrastructure projects was on the line, following the decision to delay construction of significant aspects of HS2 by two years.
“The focus on reducing inflation in today’s Budget hopefully means a rethink to the delivery of major projects in the medium and long term,” he said.
“There is plenty for EIC and its member to digest from today's statement. We will be sharing further analysis in due course and look forward to working with government on its ambitions."