As the Chancellor prepares to deliver the 2023 Spring Statement, Ed Rimmer, Chief Executive Officer at Time Finance, shares his predictions for this year’s ‘mini budget’ and what businesses need to see from the Government to boost growth and productivity.
It’s been a year since the former Chancellor made a series of promises to businesses to put in place measures and funding to boost innovation, skills training, productivity and growth. What this looked like was set to be announced just six months later, at which point a new Prime Minister and new Chancellor had an altogether different agenda.
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But just two months ago, Jeremy Hunt delivered a speech that got the conversation re-focussed on growth and productivity. He rejected declinism, and talked about the reasons for optimism, giving businesses hope that the Government has a plan for productivity, innovation and economic growth.
Budget 2023
Although this will effectively be a ‘mini budget’, there should be nothing small about it. Businesses have faced several years of economic instability, and more recently rising costs. Many have thrived against the odds and evolved to respond to these pressures, but in contrast, many haven’t. In 2022 we saw business insolvencies reach a 13-year high at 22,000, which is a shocking statistic. There is always a natural cycle of business insolvencies, but this drastic upward curve needs action. A two-pronged strategy is what’s needed from the Government – measures to support the survival of viable businesses, and a strategy to support growth.
Balancing overheads with growth
There are predictions that energy prices will fall in 2023 – good news for everyone but particularly for businesses that will lose much of the Government’s support from next month. This will, however, happen at the same time as the planned rise in corporation tax from 19% to 25%. Though businesses have had time to plan for this increase, it will undoubtedly hit them hard just when they are looking for some respite from rising costs. This increase is estimated to generate an additional £18bn a year for the treasury, and what I would like to see is some tangible benefit being funnelled back to businesses from this extra revenue. New investments in training, investments in research and development and advances in the green economy to support sustainability. If businesses are paying higher taxes, they need to see this returned to them in the form of measures that will help them grow.
Boosting the UK workforce
Workforce shortages have been a major challenge for businesses over the past few years, and it is time they saw a plan of how this is going to be addressed. Competitive job markets have contributed to rising costs, which has in-turn fueled rises in inflation. There are estimates that there are 6.6 million people not currently in employment, and given the right means, support and investment, bringing the majority of these people into work would unlock a new stream of talent for UK businesses.
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By GlobalDataIn a recent poll, we asked our business community if the employment market was in a good shape to withstand a recession and 56% said the job market is slowing down. So the challenge for the Government is two-fold – measures are needed to stimulate the job market while putting in place systems that support people into work. Reform for childcare provision is on the cards, but there are many more layers to this. Investment in skills is a huge opportunity here. It is one thing to put in place systems to help people back into work but it is another to equip them with the knowledge and skills for the industries that need them most. Real and targeted investment in training and development will be essential for businesses.
The Government is moving towards its target to halve inflation this year and it remains to be seen how this will be achieved. Ultimately, the focus must be on creating financial stability, which breeds confidence and optimism. Businesses that feel secure are businesses that are more likely to take risks, and as the Chancellor said in January, it is the risk-takers who succeed, grow and prosper.
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