By Michelle McGrade, chief investment officer, TD Direct Investing
There was a feeling of getting Britain in the best possible place for Brexit with this, Chancellor Philip Hammond’s first and last Spring Budget.
There were no radical policy changes; instead there was a great deal of emphasis on unity to “build a stronger, fairer, more global Britain”; to borrow Mr Hammond’s parlance. It was an emphatic message that Britain is open for business and an attractive place for business.
This was no doubt done to enhance relationships with multinationals at a time when the British Government will seek to strike their own trade deals. To help facilitate such deals, a commitment to reduce corporation tax to 17% by 2020 was confirmed.
Plugging the skills the gap
At the top of the agenda, Mr Hammond sought to address Britain’s productivity levels. To address this, there was a considerable amount dedicated to improving the skills of the next generation, helping them transition from learning to working seamlessly via T-Levels.
The creation of 110 new free schools, as well as additional funding for existing schools is another step to narrow the skills gap of the next generation and equip them with the knowledge and experience required to succeed in today’s society.
There was also £300 million allocated for research & development (R&D) in the field of science to create 1,000 PhD placements, and £270 million for innovation in disruptive technologies and bio-technology.
The hope is that Britain will develop a workforce able to contribute with all others across the globe, and one which will help make the country an attractive place for business.
When it came to taxation of start-ups, there was a definite feeling of giving with one hand and taking with the other. A commitment to cap business rate rises at £50 a month for companies who have grown out of their ‘small business status’ is a short-term measure to help them adjust.
Perhaps the main headline-grabbing policy was to increase National Insurance Contributions for the self-employed and those running start-ups. In addition to that, the tax-free dividend allowance will be slashed from £5,000 to £2,000 from next year. At the same time, though, the self-employed will be granted access to a new state pension.
There was investment put aside for Scotland, Wales and Northern Ireland as Mr. Hammond continued the theme of unity. On a more granular level, six mayoral positions in major cities across the UK and a Midlands Engine strategy to support the Northern Powerhouse movement were also announced.
Overall, this Budget wasn’t ground-breaking but no-one expected it would be. It clearly lays a path towards Brexit to ensure Britain is as ready as possible to stand on its own two feet. Apt really given that so much of Mr. Hammond’s speech was about the next generation and “our children” growing up.
This was a Budget inspired by making the UK the place for business – which was very much about the whole of the UK, not just England. The focus on upskilling students to be ready and prepared for the workplace will be a boon for businesses looking to relocate or grow in the UK. Accompanied by significant investment into science and innovation, nurturing domestic talent is vital as the UK looks to find its place in the world post-Brexit.
It was a Budget of contradictions, however, as the National Insurance contributions of the self-employed – invariably the drivers of innovation – were increased. This move needlessly penalises start-ups in their earliest phase of development and also negatively impacts on successful ‘disruptive’ businesses like Uber and Deliveroo, which increasingly rely on freelance workers.
Over the coming weeks, I will be taking a closer look at the key issues and views on Article 50 and how Britain is shaping up for Brexit on our Article 50 hub.