Cautious welcome to mini-budget but concerns over longer term impact on growth
Midlands businesses will welcome the additional support on offer thanks to Chancellor Kwasi Kwarteng today, but more still needs to be done longer term if the region is to see a real benefit from a raft of tax cuts.
Organisations and companies across the Midlands today gave a cautious welcome to the fiscal event announcements, which saw National Insurance rises reversed, planned rises in Corporation Tax reversed and the removal of the IR35 scheme, which affects thousands of businesses which use contractors.
Marches Local Enterprise Partnership chair Mandy Thorn MBE said the overall economic outlook remained tough and that the introduction of low tax Investment Zones would be ‘short-sighted’ if they were restricted to metropolitan areas. The LEP works with public and private sector partners to develop economic growth across Herefordshire, Shropshire and Telford & Wrekin.
“I welcome the fact that the Government has laid out some clear economic policies, which has not always been the case in recent months. This will give business some much-needed clarity and allow plans to be put in place.
“But if it is the Government’s intention to focus Investment Zones largely on conurbations, there is little doubt that rural areas such as the Marches will be harmed. This is short-sighted and something I would urge them to review immediately.
“The time is long overdue for a meaningful reform of the business rates system, including reducing the level of the multiplier, and ensuring that VAT relief for the hospitality sector and non-essential retailers is extended for as long as it is needed.”
James Sage, a Partner with law firm FBC Manby Bowdler’s Corporate team, said many businesses in the current economic climate would welcome the scrapping of the planned increase in Corporation Tax, but questioned the overall economic impact the measure would have.
“Previous cuts to this tax have failed to either drive significant investment or boost the speed of economic growth that they were intended to deliver, so it’s hard to see why that should be any different this time.
“Tax cuts of this kind are simply small steps towards cost reduction and to encourage meaningful growth, we instead need to incentivise businesses to invest.”
Doubling the stamp duty threshold was broadly welcomed as a move which would help first time buyers, but given rising interest rates and ever-lengthening delays in the housing market, there was concerns over how much real impact the move would have.
Hayley Griffiths, Senior Associate and Head of FBC Manby Bowdler’s Residential Team, said: “Plans to cut the duty come about a year after the end of the stamp duty holiday, which was brought in to support the housing market during the pandemic.
“One of the impacts of this past-pandemic was to push prices higher and stall sales particularly for first time buyers.
“This tax break will certainly give people more confidence that they can buy and sell and we’d expect to see transactions rising in the coming months. However, it is worth remembering households are already under pressure from rising energy and food costs. With interest rates rising and forcing mortgage payments up for those not on fixed rates, this may be a stamp duty sticking plaster and more support may be needed in the future.”
Heather Poole-Gleed, of Shropshire Property Search, is a director of IPSA, the national network of local property search experts working with solicitors to speed up home purchase transactions.
She warned the rise in threshold could be a temporary fix for a market beset by delays.
“There’s no doubt that the changes in stamp duty announced today will help first-time buyers and should kick-start some growth in the housing market. However, it doesn’t help address the problem many buyers are experiencing, and that’s extensive delays between putting the offer in and moving in.
“It can take on average about 13 weeks to move home, with some delays due to the time taken to complete the necessary legal searches.
“We know that solicitors using property search experts which are local to the area where land and homes are being bought are often able to deliver these back to their clients within a week. This practice, combined with the stamp duty cut, would certainly see some buoyancy return to the housing market.”