Reaction: Scottish business leaders give tempered welcome to Spring Budget announcements

One Scottish business expert sees “few announcements of note” for the sector.

Business leaders in Scotland have reacted to Jeremy Hunt’s Spring Budget Budget “for long-term growth” with both warmth and warnings as they continue to charter a path through further macroeconomic turmoil.

The Chancellor highlighted growth that had been achieved since 2010 “despite the most challenging economic headwinds in modern history”, and with interest rates currently sitting at an elevated 5.25 per cent. However, he noted that inflation is now expected to fall from 4 per cent at present to under the 2 per cent target in a matter of months, according to the Office for Budget Responsibility (OBR), as he unveiled business-focused measures such as upping the VAT registration threshold for firms to £90,000 from £85,000, for example.

Mr Hunt also flagged as priorities encouraging investment by larger firms, and more support of their smaller counterparts. The latter was welcomed by the Federation of Small Businesses’ Scotland policy chair Andrew McRae. Such firms (which the trade body has pointed out comprise 99.3 per cent of all of the UK’s private sector companies) “are crucial for economic growth, and we were glad the Chancellor said that clearly from the despatch box”, he said. “That said, those businesses face serious challenges – not least through rapid hikes in costs and shrinking margins – and they’ll be examining some of the measures outlined in today’s statement closely.”

The Chancellor highlighted growth that had been achieved since 2010 'despite the most challenging economic headwinds in modern history'. Picture: Stefan Rousseau - WPA Pool/Getty Images.

Measures which Mr McCrae also praised include the news of £200 million of funding to extend the Recovery Loan Scheme as it transitions to the Growth Guarantee Scheme, which the Chancellor said will help 11,000 SMEs access the finance they need, and is a “sensible pro-growth measure” according to the FSB spokesman. “We welcomed the announcement of investment zones in Scotland last summer… It’s therefore good to see a redoubling of the government’s commitment to the Scottish zones, by extending them from five to ten years in duration.”

Another announcement pricking up the ears of trade bodies in Scotland was the new British ISA, which Mr Hunt said will allow an additional £5,000 annual investment for investments in UK equity. Such a move will help savers benefit from the growth of UK companies, according to Sandy Begbie, chief executive of Scottish Financial Enterprise (SFE).

He also said companies in Scotland and across the UK “are looking for a level of certainly, continuity, and stability that has been lacking for too long in UK and Scottish politics”, and he was also one of many business experts to touch on the reduction of National Insurance contributions, with the OBR saying this could fill more than one in ten vacancies throughout the economy. The SFE boss said this “will be welcome news for families in Scotland, lowering cost pressures and providing a much-needed lift to consumer confidence”.

And Mark Pryce, head of business tax with accountancy firm Azets in Scotland, said the move means a “significant” tax saving for around 29 million people in work. He also stated: “Employees and self-employed individuals on average wages are the big winners from a Budget that has put rewarding the hard working ethic centre stage in a drive to fill vacancies and improve the UK’s productivity.”

Dr Liz Cameron, chief executive of the Scottish Chambers of Commerce (SCC), said the reduction – equivalent to an additional £450 a year for the average employee or £350 for someone self-employed, according to the Chancellor – “was the right thing to do to help households with the cost of living”. But she added: “From an employer perspective, reducing employer contributions with the savings directed towards business investment and employee retention and recruitment was a missed opportunity.”

She also explained how she felt the Budget did not go far enough in supporting companies, which continue to face spiralling costs fuelled by higher energy prices, for example. “From a business perspective, not enough has been done to change the narrative and restore our reputation as an entrepreneurial and business-friendly nation. The Chancellor has set out his ambitions for growth and has committed to some nuggets of hope for the business community. But the overriding impression is that his real ‘long-term plan’ to address our economic stagnation has been left for another day, perhaps even another government.”

Vishal Chopra, head of tax for KPMG Scotland, summed up the Budget as focused on supporting families and workers, but he saw “few announcements of note” for businesses. “The extension of full expensing to leasing has been largely anticipated, although the Chancellor’s comment that this would happen when ‘finances allow’ may raise some eyebrows as to timing,” he added. “The extension of the windfall tax on energy providers to 2029 will be a disappointment for affected businesses, particularly those based in the North-east of Scotland.

“There were, however, some pieces of good news scattered around with announcements of a freeze to alcohol duty which will support the hospitality sector, as well as more generous tax incentives for the creative sector. All eyes will now turn to the election and, if dates allow, a potential Autumn Statement later in the year. Tax is currently failing to be a dividing line between the two main parties – but there is still time.”

As for next steps, Mr Begbie said: “We would like to see a greater level of ambition and a clearer long-term economic plan for inclusive growth and a net-zero economy, aimed at unlocking private investment and ultimately expanding the tax base to help us better fund vital public services.”

He called for greater collaboration between the Scottish and UK Governments, while Cameron Stott, head of Scotland at property specialist JLL, said: “With interest rates and inflation both remaining sticky, the Spring Budget was never likely to be too transformative for Scottish business. However, whichever party is in power after the next election, they should make sure that supercharging the country’s development pipeline is at the top of their agenda.”