Access Alert: Autumn Statement 2023 takeaways

On Wednesday 22 November 2023, Chancellor of the Exchequer Jeremy Hunt delivered the UK’s Autumn Statement. Confronted with the pressures of the upcoming 2024 general election, this ‘mini-budget’ presents one of the Conservative government’s remaining opportunities to win over public favour.

Polls remain stubbornly against Sunak’s government. Yesterday’s Autumn Statement changes tact with an economic policy ‘changing gear’, introducing the biggest tax cuts for businesses and individuals since 1988 while reviving a long-dormant mantra of ‘compassionate Conservatism’ (coinciding with last week’s return of former prime minister David Cameron to cabinet).

While it struck with a more optimistic tone than last year’s address, the chancellor’s measures offer little to the tech sector due to the government’s continued reliance on funding R&D initiatives. Nevertheless, the Autumn Statement better serves the space sector and bolsters advanced manufacturing capabilities across devolved regions.

Macroeconomic forecast

The Office for Budget Responsibility has confirmed that the government is on track to achieve its three economic missions: halving inflation, growing the economy, and cutting national debt. Inflation has fallen from 11.1% when Sunak took office to 4.6%, which is lower than half of EU economies and on course to reach 2.8% at the end of 2024 and the target rate of 2% in 2025. While the economy has grown by 0.6% in 2023, the OBR’s growth forecast for 2024 has fallen from 1.8% to 0.7%. Finally, headline debt is now predicted to be 94% of GDP by the end of the forecast (down from 100%), and is expected to decrease every year compared to forecasts in Spring.

Tech Sector Measures

• Emerging technologies and innovation: The UK government has committed GBP 500 million for AI compute infrastructure and GBP 145 million through Innovate UK for business innovation in productivity, decarbonisation, battery technology, Catapult investments, and critical technologies. Additionally, the government has outlined quantum missions for the next decade and will look to implement Professor Dame Angela McLean’s recommendations on pro-innovation regulation.
• R&D funding: Several R&D initiatives have been funded to support scale-up programmes, investment in research, and scientific infrastructure.
• Long-term Investment in Technology and Sciences (LIFTS): GBP 250 million has been committed to two successful bidders under the LIFTS initiative. This will create a new investment vehicle tailored to the needs of pension schemes, seeking over GBP 1 billion of investment to support UK science and technology businesses.
• Space sector: A Space Clusters and Infrastructure Fund of up to GBP 59 million will support 15 projects, in collaboration with private sector funding, to raise a combined BGP 100 million investment in space research and development infrastructure. The government has further assigned GBP 47 million to improve the use of Earth Observation data for climate science.
• Advanced manufacturing: Funding of GBP 4.5 billion will be available from 2025-26 to last for five years across the following manufacturing sub-sectors: automotive (particularly zero-emission vehicles, their batteries, and supply chains), aerospace, life sciences, and clean energy (carbon capture, utilisation and storage, electricity networks, hydrogen, nuclear, and offshore wind). This has been complemented by a significant lift to encourage advanced manufacturing across devolved regions and investment zones.
• Telecommunications: 10 regions have been awarded funding to establish themselves as 5G Innovation Regions following a competition for the GBP 40 million adoption fund.
• Digital transformation: Several government initiatives have been announced to digitalise the housing sector and work and pensions, as well as the introduction of digital assets and supporting SMEs.
• Skills: GBP 50 million has been assigned to a two-year pilot to explore ways to stimulate training in growth sectors and address barriers to entry in high-value apprenticeships.
• Foreign and direct investment: Pro-investment recommendations are to be implemented, including establishing a Ministerial Investment Group, reviewing investment grant processes, increasing resources for the Office for Investment, and strengthening the UK’s world-class concierge service for investors.
• Corporate environmental responsibility: The Plastic Packaging Tax rate will increase from 1 April 2024 to GBP 217.85 per tonne. An evaluation plan will be published by the end of the year.
• Regulators: New draft statutory guidance will update and strengthen the current Growth Duty guidance for regulators for consultation. The government is extending the Growth Duty to Ofcom, Ofwat, and Ofgem, with secondary legislation to be introduced in 2024.

Other headline measures

• Business tax relief: Full expensing is to be made permanent, meaning that, from 1 April 2026, investments made by companies in qualifying plant and machinery will continue to qualify for a 100% first-year allowance for main rate assets and a 50% first-year allowance for special rate (including long-life) assets.
• Small Businesses Multiplier: In 2024-25, the small business multiplier in England will be frozen for a fourth consecutive year at 49.9p, while the standard multiplier will be uprated by September CPI to 54.6p.
• Retail, hospitality, and leisure relief: The current 75% relief for eligible Retail, Hospitality, and Leisure (RHL) properties is being extended for 2024-25, a tax cut worth GBP 2.4 billion.
• Extending the Employer NICs relief for employment of veterans: The government is extending the NICs relief for employers of eligible veterans for one year. The relief means businesses pay no employer NICs on annual earnings up to GBP 50,270 for the first year of a qualifying veteran’s employment in a civilian role.
• Investment in HMRC debt management capability: GBP 163 million will be invested to improve HMRC’s ability to manage tax debts. Tougher consequences for promoters of tax avoidance schemes will be introduced.
• Financial Services: There are several proposed provisions to replace legacy EU legislation regarding Securitisation Regulation, Short Selling Regulation (SSE), Data Reporting Services Regulation (DRSR), and Prospectus reform.
• Government procurement amendments: There will be a procurement requirement to demonstrate company invoices are paid within an average of 55 days, tightening to 45 days in April 2025 and 30 days in the coming years.
• National Insurance: A cut from 12% to 10% will be introduced from 6 January 2024 for 27 million people.
• Minimum wage: An increase of 9.8% to GBP 11.44 from April 2024.
• Self-employment tax relief: No one will be required to pay Class 2 self-employed NICs from April 2024.
• Pensions: Working age benefits will increase in line with September 2023 inflation to 6.7%, maintaining the ‘triple lock’. There were several proposed reforms to pension fund investment schemes, as well as the implementation of a Value for Money framework.
• Tougher benefits rules in ‘Back to Work Plan’: Universal Credit claimants who have completed the Restart Programme and remain unemployed after 18 months will undergo a review conducted by a work coach. Claimants who do not agree to revised claimant commitments without a good reason, which could include attending a mandatory work placement or new intensive work search activities, will have their claim closed.

Access Partnership closely monitors all developments impacting the tech sector. For more information on the UK’s plans or what Autumn Statement may mean for your business, please contact Jessica Birch at [email protected].