Chancellor of the Exchequer, Kwasi Kwarteng, issued his mini-budget today (23 September), aimed at boosting growth and cutting taxes.
The proposals, which included support for businesses and the announcement of new “investment zones”, received a mixed reaction from industry leaders.
Tax-free shipping
Kate Nicholls, CEO of UK Hospitality, welcomed aspects of the package, but urged the government to apply the principles of the local investment zones to business rate reform.
She added that the proposal to give tax-free shopping to overseas tourist and visitors could have been “applied to our UK tourists and customers visiting pubs, attractions and restaurants by lowering the rate of VAT for UK consumers too.”
David Hening, UK director at the European Centre For International Political Economy, while remaining critical of the government’s efforts, stated on Twitter that “the restoration of tax-free shopping was overdue”.
‘Good day’ for business
CBI director Tony Danker praised government efforts on planning and infrastructure reforms, saying “today is day one of a new UK growth approach. We must now use this opportunity to make it count and bring growth to every corner of the UK.”
The Institute of Directors also welcomed the mini-budget, with chief economist Kitty Ussher stating “this is a good news day for British business”, citing the reversals of planned increases in employers’ national insurance and corporation tax as positive examples of government support.
However, Steven Alton, CEO of the British Institute of Innkeeping, stated “the measures announced do not address the vulnerability of our small pub businesses in every community.”
Deregulation and tax cuts
On the planned investment zones, Stuart Tym, a partner at law firm Shoosmiths, described the proposals to BusinessLive as: “hyper-freeports, eclipsing those announced by the previous administration in terms of deregulation.”
Lisa Hooker, consumer markets lead at PwC, said: “the tax reductions and investment for growth should help the consumer longer term and short-term energy cost support is important,” adding that market “is still waiting to hear about any other cost measures such as business rates.”
Stormy waters ahead
Make UK’s CEO Stephen Phipson said that the package includes a number of “positive measures” but warned of “stormy waters” ahead.
He noted that this was the sixth growth strategy in a decade and that this resulted in “zero certainty” for businesses.
The FT reports that the pound hit a 37-year low against the US dollar, as investors expected to see a rise in the selling of government debt in order to fund Kwarteng’s package.
Flash index
As the budget was being announced, figures from the S&P Global/CIPS Flash UK purchasing managers’ index (PMI) suggested that the UK will face a further decline in business activity.
The index (PMI) fell to a 48.4, down from 49.6 in August. A Reuters poll of economists had predicted a reading of 49.0.
Any number above 50 usually corresponds with growth, and a reading below 50 normally indicates contraction.
