A leading tax expert has warned that the financial support measures announced in today’s mini-budget must deliver growth for UK businesses, with the cost of borrowing likely to keep increasing.
Chancellor Kwasi Kwarteng unveiled a string of new measures aimed at fuelling growth, including cuts to the basic rate of income tax, a reversal the recent rise in National Insurance (NI), cancelling the planned rise in corporation tax in April 2023, and a £60bn energy package.
Andrew Moorby, Managing Partner at Azets in Newcastle and Stockton on Tees, the UK’s largest regional accounting firm and specialist business advisor to SMEs, says growth must follow to pay for the measures or the UK will be forced to keep borrowing.
He said: “The plan to fuel growth but not inflation is a fine balancing act. If growth does not follow, these measures will be funded by more borrowing at a time when the cost of borrowing is increasing, as the Bank of England continues to raise interest rates in a bid to dampen inflation.
“If the measures fail to deliver growth, it will put the UK and its business community in a tricky situation.”
Andrew believes the mini-budget could have gone further in direct support of SME businesses, though he welcomed cuts to NI.
He said: “Reductions in VAT and business rate relief would have directly helped SMEs. Cutting the higher rate of corporation tax, when many small businesses are facing a loss, does not help them. However, the NI cuts will help, and businesses will welcome the announcements on support around energy.”
Ahead of the mini-budget, the Chancellor confirmed the Energy Bill Relief Scheme, cutting energy costs for non-domestic energy customers such as businesses, charities and public sector organisations.
Andrew Moorby says the scheme will provide temporary relief but is calling for a longer-term plan, including a move to more ESG and greener energy.
He added: “The longer-term view must be a move to more ESG and greener energy. This could be the catalyst to drive SMEs towards greener options that make economic sense, such as small-scale wind and solar backed up with battery storage.”