8 Mar 2024

What's in the Budget for Business?

The Spring Budget may fail to change the political weather for the Conservative Party but will nonetheless have far-reaching effects for business. This article aims to dissect the recent fiscal statement, breaking down its key components and analysing what it means for businesses across various sectors.

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Macroeconomic Outlook

By prioritising National Insurance over Income Tax cuts the Chancellor has also helped to allay investor concerns over inflation and thereby increased the confidence in markets of future interest rate reductions with traders betting on cuts possibly as early as May. In fact, the forecasts show inflation is set to return to its target rate of two per cent within months, providing further confidence of interest rate relief.

The OBR themselves forecast interest rates falling more than one per cent by the end of the year and downgraded its forecast for medium term interest rates. This is the first positive news on interest rates for business in almost two and a half years since the Bank of England started raising its rates. An ease to the cost of borrowing and a more stable cost environment with moderating inflation will provide greater certainty to businesses when making investment decisions and should raise consumer confidence as well.

Further to this, supporting business investment was clearly central to the Budget narrative with Jeremy Hunt seeking to enhance incentives for firms through extending the full expensing policy, made permanent in the Autumn Statement, to leased assets. Whilst this has received a warm welcome from lobby groups like the CBI, its implementation remains uncertain and only to occur once “fiscal conditions allow”. Meanwhile, the new £5,000 allowance on top of the existing £20,000 for tax-free savings through a new British ISA for investment in British companies will be welcomed by the City and Britain’s high growth sectors.

However, a problem for the government, and consequently for business, is the sustainability of the public finances. Although the Chancellor has met his fiscal rule for debt to be falling in the final year of the forecast period, this is with just £8.9 billion in headroom, two-thirds less than the average since 2010. In fact, the OBR only gives a 54 per cent chance of the government hitting that fiscal target.

The decision, criticised by the government’s own Energy Minister, runs the risk of deterring energy investment if uncertainty persists over the levy’s longevity

In all probability, this spells out further fiscal tightening will be needed after the election and given the spending plans of the government are already considered “a work of fiction” and unrealistic, the burden may fall on taxation. Director of the Institute for Fiscal Studies Paul Johnson said that, given the state of public services and government finances, “we’re going to need more money over the next five years rather than less”.

Furthermore, part of the spending squeeze already pencilled in for the next parliament includes a freeze on public sector investment, bringing its figure down to 1.7 per cent of GDP by 2028-29. Reducing investment in productivity-enhancing initiatives like better transport, digital infrastructure and connectivity won’t benefit businesses in the medium-term and could see the UK further fall behind its peers on productivity, which has already seen near stagnant levels of productivity growth since the Global Financial Crisis.


Hospitality has been particularly critical of the Budget, with UK Hospitality, representing much of the sector, having sought a reduction in VAT and a cap on business rate increases to reduce the number of hospitality venues being forced to close due to cost pressures, with over 6,000 having done so last year.

This disappointment of the industry was furthered with the Chancellor’s decision not to reinstate VAT-free shopping for tourists, abolished in 2020, despite calls from much of his own party and businesses in the capital to do so.

More positively, a freeze in alcohol duty and extension of the 5p cut in fuel duty should help from further exacerbating the cost pressures faced by businesses (and households) over the last two years. Furthermore, the £5,000 increase in the VAT registration threshold should benefit more than 28,000 firms in cutting their taxes and supporting growth. Nonetheless, the fact that the threshold had been frozen since 2017 meant many felt the increase should’ve been much greater.


The property market should be buoyed by expectations of falling interest rates, with growth in house prices expected by next year and continuing thereafter at a steady rate as a continued mismatch between demand and slowly growing supply places further upward pressure on the sector.

One positive announcement for the industry was a cut to capital gains tax on residential property to 24 per cent for higher rate taxpayers, a boon for landlords and second homeowners. Given the incredibly tight rental market faced across the country, particularly since 2020 with average rents having risen by more than 31 per cent.

However, stamp duty proved a disappointing aspect for the Budget. Not only was multiple dwellings relief abolished but the hopes of many that stamp duty may have been reformed or even abolished to help free up the housing market and make it more rewarding to downsize later in life.

Moreover, the abolition of the existing regime for letting out holiday homes will particularly affect those businesses in popular tourist areas like Cornwall and the Lake District where it has been most extensively used and accused of placing enormous pressure on house prices.


The Growth Guarantee Scheme, originally launched during the pandemic offering a 70 per cent government guarantee on loans to small businesses, has been extended once more until the end of March 2026. By providing a lifeline to small and medium-sized enterprises, the extension is set to support around 11,000 companies through to 2026 and is particularly targeted outside the capital with more than 80 per cent of facilities given to firms outside London.

More controversial has been the government’s extension of the windfall tax on energy companies’ profits, now running for another year until 2029. The decision, criticised by the government’s own Energy Minister, runs the risk of deterring energy investment if uncertainty persists over the levy’s longevity.

Finally, culture and the arts were a surprise winner of the Budget measures receiving more than £1 billion in new tax reliefs including 40 per cent business rates relief for film production and expanded tax credits for theatres, orchestras, museums and galleries. Given the record £6.27 billion invested in British film and high-end TV production in 2022, the Chancellor’s giveaway should help further support growth in this sector and help cement Britain’s position as a world-leader in media production.

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