The Chancellor put business at the centre of his speech and did his best to reassure firms facing uncertain times.
However, a lack of detail casts shadows over an otherwise pro-business statement with headline-grabbing announcements such as the £2bn R&D investment providing no real clarity for businesses.
With Brexit negotiations around the corner, and the impact it will have on the UK economy yet unknown, Hammond delivered a considered and targeted speech designed to help the UK economy cope with the current uncertainty and the likely turbulence ahead, says Jo Gilbey at BDO.
R&D
Jo Gilbey, tax partner at BDO, says: “The £2bn annual fund to support R&D investment will take time to trickle through and impact businesses positively.
“Companies love R&D reliefs; they are genuine triggers that boost investment in innovation and technology. However, the £2bn figure is misleading. R&D reliefs are a form of EU state aid rules and it would be difficult – if not impossible – to see how the Government can action this pre-Brexit without it being detrimental to the UK’s negotiations with the EU.
“The devil will be in the detail but, realistically, there will be limited action here until we have triggered Article 50.”
Tax simplification
The Chancellor finally addressed the complexity of UK tax code but much more needs to be done to help businesses succeed.
Jo Gilbey, tax partner at BDO, said: “The Chancellor acknowledged the scale and complexity of UK tax legislation when he announced his first real tax simplification action – having just one major fiscal event each year from 2018, the Autumn Budget.
“Businesses will welcome this move. Again, the impact won’t be immediate but it is a step in the right direction and will make it easier to plan for the long-term, could improve the quality of legislation and result in less frequent change for businesses.
“He also touched on the alignment of employees’ and employers’ national insurance thresholds – but Hammond could have taken it much further to align income tax and national insurance rules. More than half of the businesses we recently polled had this as their number one simplification measure to help reduce the administrative burden and bring employment taxes into the 21st century.”
She adds: “Businesses will be disappointed that more wasn’t done to progress tax simplification. UK tax legislation is almost 20,000 pages long. From a business perspective, the sheer volume and complexity of tax law is a major obstacle to growth.”
Infrastructure and productivity
Hammond spent a lot of time talking about infrastructure and productivity. His long-term focus will be reassuring to businesses that like certainty.
Jo Gilbey said: “It is rumoured that every £1 invested in infrastructure results in £3 of economic activity so I can see why infrastructure, infrastructure, infrastructure was the order of the day.
“Boosting productivity and bridging the gap with G7 nations will benefit businesses and workers in the long term. However, the productivity puzzle is a tough nut to crack and the Government must realise that it’s not just about innovation and; it’s about getting more by doing less.
“Making things simpler, helping businesses navigate the system and eradicating out-dated laws that make tax more taxing can only help growth and prosperity in the long term.”