Spring Budget 2021 Summary

Against a backdrop of the ongoing COVID-19 pandemic, the budget was very heavily focussed on extending support currently in place for businesses, as well as introducing measures to boost economic recovery and repay national debt over the next five years. 

In this blog, we take a look at the main points.

State of the economy

• Borrowing has reached the highest peacetime levels in history due to the pandemic – currently 17% of the UK’s national income
• The OBR expect annual growth is set to rebound by 4% this year, followed by 7.3% growth in 2022
• The OBR predict the economy to return to pre-pandemic levels by mid-2022 (six months earlier than predicted in Nov 2020), however, over the next five years, the economy will be 3% smaller than it would have been
• 700,000 people have lost their jobs due to the pandemic, with unemployment currently sitting at 5%. Unemployment is expected to peak at 6.5% next year, lower than 11.9% previously predicted 
• In light of the ongoing COVID pandemic, to date a total of £407 billion worth of measures has been allocated to support the economy, with an additional £65 billion worth of measures announced as part of today’s budget.

 

Public Spending and Support

• The National Living Wage will rise by 19p to £8.91 in April
• An additional £1.6 billion will be put towards the COVID vaccination programme rollout
• Universal Credit top-up of £20-per-week will continue for a further six months
• £19 million pledged to go towards domestic violence programmes
• The stamp duty exemption on the first £500,000 will continue until the end of June, with the nil rate band then set at £250,000 until the end of September
• Guaranteed 95% mortgages available

 

Funding for Businesses

• The Coronavirus Job Retention Scheme (CJRS)/Furlough Scheme and Self-Employed Support Scheme will be extended until September (but terms will change - employers asked to contribute 10% from July, and 20% from August)
• 100% business rates holiday in England extended until June and will not go back to the standard rate but will be reduced by c66% for closed businesses with a lower cap for those who have been unable to trade for nine months
• 5% VAT rate for hospitality extended until 30 September 2021, before increasing to 12.5% for a further six months until 31 March 2022
• A new recovery loan scheme will replace the current Bounce back and CBILS Schemes when they come to an end. Businesses of any size can borrow from £25,000 to £10 million grants (the government will guarantee 80% of this)
• A new £5 billion Restart Grant Scheme has been confirmed for retail, hospitality and leisure businesses (on top of £20 billion already provided)
  • Non-essential retail businesses will receive grants of up to £6,000 per premises
  • Hospitality and leisure businesses will get grants of up to £18,000
• £150 million has been allocated towards a Community Ownership Fund to help communities take ownership of pubs, theatres, shops, sports clubs at risk of closure
• Additional funding for apprentice hires, with an increase to £3,000 paid per apprentice
• £700 million worth of additional funding will go to arts, culture and sporting associations as they reopen
• The ‘Help to Grow Digital’ initiative will continue – helping small businesses develop digital skills by giving them digital training and software worth £5k each
• A new points-based visa system will be introduced to encourage high-skilled migrants to the UK, this will include researchers, engineers, scientists

 

Regional Updates

• The new UK Infrastructure Bank will be based in Leeds
• Eight new free ports were announced to encourage regional growth: East Midlands Airport, Liverpool, Felixstowe, Humber, Plymouth, Thames, Teesside, and Solent
• Darlington has been confirmed as new economic campus for Government’s Treasury North
• An additional £2.4 billion will be allocated for the devolved administrations in Scotland, Wales & Northern Ireland

 

Tax and Duties

• One of the most impactful updates for all our sectors: there has been no changes announced to Capital Gain Tax, annual CGT exempt amounts or the lifetime limit on BADR
• All alcohol and fuel duties frozen
• Two new measures will be introduced to address borrowing and balance the UK’s debt levels:
  • Personal Tax allowance: No increase to income tax, NI or VAT until 2026, with the threshold for paying the basic rate rising to £12,570 in 2022
  • Corporation Tax will increase from 19% to 25% in 2023 (only businesses with profits of over £250,000 will be taxed at the new rate, with businesses with profits of under £50,000 continuing to pay at the old rate)
    • A new super deduction will be offered to companies that invest - during 2021-22 companies can reduce their taxable income by 130% of what they spend on innovation (OBR believes this will boost investment by 10%)

 

The provisions set out in the budget have been broadly welcomed by our sectors.

 

Darren Bond, Global Managing Director, Christie & Co, comments:

“The Spring budget was widely anticipated to expand on many of the Chancellor’s previous commitments to businesses and staff, and in many respects was well received. The extension of the furlough scheme, business rate holiday, and VAT rate relief for hospitality, as well as the new recovery loan scheme and Restart Grant Scheme are all extremely positive updates for many of the sectors in which we operate and offer critical support for businesses.

“However, the current business climate for many is one of cautious optimism. Amidst considerable financial pressure, businesses need a degree of certainty that there will be no deviation to the current roadmap so they can plan ahead, manage their workforce and look forward to recovery. At Christie & Co we continue to witness the resilience of business owners and are extremely proud to continue to support them as many prepare to re-open their doors and look to establish the ‘new normal.”  

 

What does the Budget mean for your business?

We take a look at the updates for each sector in more detail below, and our sector MDs weigh in with their thoughts. 

Hospitality & Leisure

The Chancellor confirmed some promising measures which directly support the hospitality sector.

These include:

• A further freeze on alcohol duties
• Rise to the National Living Wage from April
• An extension to the business rates holiday, VAT cuts and CJRS Furlough Scheme
• Confirmation of a new recovery loan scheme to replace the current CBILS scheme when it ends
• The announcement of two new schemes to support the sectors’ recovery, including the £5 billion Restart Grant Scheme and the £150 million Community Ownership Fund to help communities take ownership of pubs, theatres, shops, sports clubs at risk of closure
• £700m worth of additional funding towards arts, culture and sporting associations as they reopen

 

Disappointingly however, the Chancellor did not address the issue of ever-increasing rent debt within the sector, which according to key trade body, UKHospitality remains a key area of concern and lacking much-needed government support.

 

Stephen Owens, Managing Director of Pubs & Restaurants, Christie & Co, comments:

“The extension of furlough support, confirmation of further grant aid, rates relief and reduction in VAT are to be broadly welcomed. It was hoped that alcohol duties might be cut which would have helped pubs in particular, although it is noted that planned increases have been cancelled. One area which was not addressed is the issue of rents. Whilst there have been rumours of the rent moratorium being extended there was no further detail provided in the Chancellors statement. This issue is the “elephant in the room” and has the capacity to undo all of the positive measures and support if not addressed in the very near future.”     

Carine Bonnejean, Managing Director of Hotels, Christie & Co, comments:

“Hospitality took centre stage during today’s budget announcement, which is very encouraging and welcomed by our sector. The various measures which have been extended, along with the new grants and schemes will support jobs and the sector in the next months as they look to reopen and start rebuilding their businesses again. The introduction of new recovery loans up to £10 million is also positive, but realistically this is an administrative challenge to implement, as shown last year and places even more financial burden on businesses going forward so we will be closely watching whether there is any improvement to how the government makes these funds available.”

 


Jon Patrick, Managing Director of Leisure & Development, Christie & Co, comments:

“Business operators within the leisure sector were waiting with bated breath, to hear whether the various forms of government support, which has been essential in carrying businesses through this difficult period, would be extended. So it comes as a great relief to many that the business rates holiday, VAT reduction and furlough scheme will all continue into summer.

“In light of the announced Corporation Tax increase that is set for 2023, the new super tax deduction scheme is something we encourage leisure operators to investigate. Whilst the tax increase is likely to only really impact smaller businesses, the next few years present a great opportunity to look at investing in your business regardless, to access additional government funding and tax offsets, which will be key to supporting business recovery.”

 

Retail

Key measures which will impact the retail sector include:

• The freeze to fuel duties, which has now been in place for eleven consecutive years
• Freeze on alcohol duties
• An extension to the business rates holiday, VAT cuts and CJRS Furlough Scheme
• An increase to the limit for contactless payments – this has more than doubled to £100
• Confirmation of a new recovery loan scheme to replace the current CBILS scheme when it ends
• Corporation Tax increase in 2023

 
Steve Rodell, Managing Director of Retail, Christie & Co, comments:

“The continued freeze on fuel and alcohol duties is very positive news for retailers within the forecourt and convenience retail space, particularly those with a license to sell alcohol. The sector also welcomes the Chancellor’s update that the government’s various support schemes, including business rates relief, VAT cuts and the furlough job support scheme will all be extended into the summer.

“The businesses we deal with have reported healthy levels of trading during the COVID-19 pandemic, due to their essential nature. However, a key change they will need to consider following the announcement, is how future profitability could be affected. The 2023 rise in corporation tax needs to be planned for.  While there is plenty of time to prepare for this change it would be sensible for business owners to consider projects to offset this tax rise and increase their value at a later date. This might include investing capital on property, plant and machinery or infrastructure over the next few years.  This could qualify for the new super tax deduction.  There is also an opportunity to take on the stars of tomorrow and recruit apprentices to access additional government funding for apprentice hires.  Petrol retailers who have hesitated investing in electric charging facilities may decide to take advantage and look at introducing charging points. Garden centre operators might consider it viable to develop that restaurant they have always planned. All these ‘investments’ into a business should help short term trading results and improve capital values in the longer term.”

 

Care

Richard Lunn, Managing Director – Care, Christie & Co, comments:

“While the Spring Budget covered many areas of taxation and funding for sectors looking to reopen in the coming months, there was a distinct lack of reference to the care and adult social care sectors, which have operated throughout the pandemic and played a pinnacle role in key frontline work. I hope that this sector will be addresses in subsequent Budgets and get the funding and recognition it rightly deserves.”

 

Child Centric

David Eaves, Director - Child Centric Sectors, Christie & Co, comments:

“The extension of the furlough scheme is likely to be welcomed by child centric sectors, particularly those where enrolment recovery has been slow. With August and September typically being a period where occupancy is lowest, this will allow childcare providers some continued flexibility in managing their staff costs over the coming months.  This announcement, coupled with the continued business rates relief, provides welcome short-term certainty to providers still facing challenges.”

“While we acknowledge the childcare sector has been historically undervalued and, in many cases, suffers from lower rates of pay, a large proportion of the sector has found it difficult to keep up with recent NLW increases of 6% or more. Increasing the rate by 2% will be welcome at a time where parents are likely more sensitive to fee increases while additional funding for apprentice hires will further encourage providers to bring apprentices in and develop the next generation of practitioners.

“One noticeable omission from the budget relating to child centric sectors is the lack of any increase in funding for free entitlement provision.  While the above measures provide short term relief the sector has long called for systemic changes to be made to the funding of “free” places and we would anticipate this campaigning to continue.

“Probably the most impactful for all our sectors is that there have been no changes announced to Capital Gains Tax (CGT) rates, annual CGT exempt amounts or the lifetime limit on BADR, which will come as a huge relief to owners concerned about increasing tax bills as they sell their businesses.”

 

Medical

Simon Hughes, Managing Director – Medical, Christie & Co, comments:

“The focus of the budget was naturally on those business sectors and industries that have borne the brunt of the pandemic. Although dentistry was closed for over two months in 2020, it has bounced back well since June and there are few signs of real financial distress across the sector. Pharmacy has of course remained open throughout.

“The change to corporation tax in 2023 will fully affect larger businesses with profits of £250,000 or above, those below will benefit from taper relief. The one highlight for pharmacists and dentists who invest in equipment is the new Super Deduction – when business owners invest they can reduce their taxable income by 130% of the cost of the investment. The scheme will last for the next 2 years and is likely to benefit both sectors.

“The much-anticipated changes to the capital gains tax regime which would impact sellers of businesses has been shelved until a later date. This may well lead to an increase in completions of business sales later in the year for those business owners wishing to beat the Autumn budget.”

 

Christie Finance

John Mitchell, Managing Director at Christie Finance, comments:

“Christie Finance welcomes the Government’s plans to continue supporting businesses with the introduction of the Recovery Loan Scheme.  As ever, the devil will be in the detail and we look forward to hearing how individual lending institutions can practically adopt the scheme and provide appropriate support to businesses.”