Spring Statement 2022: Where does this really leave you?

The long anticipated Spring Budget is finally here and today we wanted to take you through what it means for you and your business.

female business owner

On the 23rd of March Chancellor Rishi Sunak stood in the House of Parliament and delivered his budget statement in its entirety, cutting fuel duty, raising National Insurance thresholds and promising business investment. While it left some wondering if he had gone far enough, in light of the shocking rise in our cost of living, we wanted to take some time to talk you through what he promised us and how we think you can take advantage of it.

Spring 2022 Mini Budget Outline

Having seen the highest growth rate of the G7 economies in 2021, despite the Pandemic and a reduction in unemployment to pre-Pandemic levels, we are, as many of our allies hit with rising costs in living and now market uncertainty due to the impact of the Ukraine war. This has meant the forecast for growth in 2023 and beyond has been readjusted from 3.8% to around 1.8%. Whilst this isn’t great news, albeit expected, we will also see a reduction in borrowing to 3.9% of GDP in 2023, reducing our deficit from £127.8bn this year to £99.1bn (although our debt interest rises to £83bn, four times that of 2021). With such high figures we should expect public sector finances to tighten and our economy to feel the pinch for several years as the government rebalances the books.

Cost of living is one of the biggest areas of concern for business owners and their employees. Covid and various global factors had already put us already on the back foot in this regard, with goods and energy prices much higher than expected, and now the war is anticipated to impact this further.

Here’s what the Chancellor outlined for this spring

Cost of living

  • Inflation is expected to average at around 7.4% this year and to stabilise in 2024
  • Fuel duty will be cut by 5p per litre for 12 months
  • Solar panels, heat pumps and insulation will have VAT removed, as we are no longer restrained by EU law. This also removes complex rules over eligibility. Wind and water turbines will also be introduced to the scheme. Decisions for Northern Ireland are yet to be made.
  • The Household Support Fund will double to £1bn to support local authorities’ quest to assist vulnerable households

National Insurance

Income Tax

  • In 2024 income tax will be reduced by 1% to 19%

Business Investment and Taxation

  • Improved R&D tax credits to go ahead, as we reported in the Autumn
  • An increase in employment allowance for small businesses to £5,000, which will provide a cut in taxation for as many as 500,000 small businesses, of around £1,000.
  • Annual business investment allowance to increase to £1 million
  • Further offerings to come in Autumn’s budget to cover employee training gaps
  • Hospitality and culture industries will still receive tax relief as outlined in the 2021 Autumn Budget
  • Help to Grow mini-MBAs 90% funded by the government will continue to help businesses develop growth plans and seek help from industry mentors

What you need to do next as a business owner

As with every budget there is a balance of gains and losses, this year undoubtedly feels like we have a storm to weather. A hard pill to swallow when Covid was tough for many of us. We feel that there are things that can be done as business owners to help protect our workforce and our profits.

Firstly, as employers we are in a unique position to help our workforce thrive even when times are tough. The most obvious answer is in their pay. If we can build a fund to cover annual pay rises to exceed inflation rates this year, we would motivate our employees to help us grow further and for longer, in effect buying loyalty at an important time. We could further incentivise activities across the board based on growth. How do we pay for that? Let Stephen Paul, Valued MD show you how in his budget planning video.

Secondly, as a business owner we can look at our expenditure. This isn’t just about immediate cost cutting, but also about long-term investment that amounts to a long-term saving. If you own your own offices, manufacturing plants or showrooms, consider energy solutions like solar. Take that further and consider circular energy or utility systems, like grey water filtering options for bathrooms. Whilst the government is providing zero VAT in this area, it helps us not only save on installation and future energy bills, but also helps us meet our environmental targets. 

Thirdly, think about how you do business. We used to work in a very static business world, where we all travelled to offices, met with every client and supplier face-to-face and our sales stream was, for most of us, one dimensional. Covid has taught us many things and more importantly it has opened up new ways to work, communicate and sell. Many of us are still transitioning back into offices and places of work, transitioning back to the way it has always been done. Ask yourself - does this really work for you going forward? Is this the most effective and efficient way for you to do business in 2022 and beyond? This feels like the perfect time to consider your future and to adapt now.

Remember, whilst we are broadly speaking we do recognise that some of these ideas may feel a little too grand for you if you are a smaller business, or a sole-trader. Please do not be discouraged and instead spend some time thinking out-of-the-box to see how you can creatively use our suggestions in your business at your current scale.

If you think you need more help, please contact your account manager. Not a Valued client? Give us a call on 01207 502145, or email us and let us help you forge the right path for your business.