Scotland's business community has had its say on Chancellor Jeremy Hunt's Budget today - with pensions and childcare reforms getting broadly welcomed while other measures were fiercely criticised.
Mr Hunt announced a wide range of measures from tax breaks for businesses to support for working parents. Other measures included the extension of the energy price guarantee and increased draught relief for pubs, as well as changes to pension allowances.
He also confirmed plans for investment zones and innovation support, as well as financial backing for Edinburgh's festivals.
READ MORE: Whisky distillers face massive tax hike in Budget as industry warns of 'historic blow' to companies
Many business leaders have welcomed the Chancellor's commitment to improving access to childcare - though will have to wait to see whether some of the high-profile changes announced for England will be replicated in Scotland.
Susie Walker, head of tax at Johnston Carmichael, noted: “From a Scottish perspective, it is worth noting that the phased expansion of free childcare for one and two-year-olds only applies to England. It will be interesting to see how Holyrood reacts to that, as it currently doesn’t apply in Scotland."
Here are just some of the reactions from Scottish business:
FSB: Firms short-changed by announcement
The Federation of Small Businesses’ (FSB) Scotland Policy Chair, Andrew McRae, said:
“Today’s budget doesn’t offer much practical help to smaller firms worrying about their costs and cashflow. Many will be disappointed at a lack of headline measures to provide the immediate support they so badly need.
“There was nothing, for example, on business energy prices once the current support scheme stops at the end of the month. We needed something better than the, simultaneous insignificant and expensive, current replacement plan.
“Neither did we hear anything about cashflow and tackling late payment – a move that would get money, money that’s already been earned, moving round the economy and working.
“One bright spot, though, was on fuel duty. Firms – especially those in our more remote and rural areas, or who need to travel the country to do business – will breathe a sigh of relief that it’s been frozen for another year following calls from FSB and others.”
Mr McRae said the FSB would keep a close eye on what other changes might mean for Scotland.
He said: “There were a number of longer-term policy announcements – such as investment zones – and it will be interesting to see their impact on the Scottish economy. At least one of these zones will be in Scotland, so whatever’s brought forward, wherever it is, the local business community must be fully involved and on-board.
"And long-term action to help parents, those with health conditions and others who are no longer economically active back into the workforce is of course acutely needed. Again, we’ll need to see exactly what today’s schemes will mean here in Scotland.
“What we do know is that, by enabling more people to return to work, smaller firms will have an even greater pool of talent to harness and find it easier to solve their recruitment woes.”
Mixed reaction from Scottish tourism sector
Marc Crothall, CEO Scottish Tourism Alliance, said: “Today’s Budget announcement by The Chancellor brings a mix of some positive outcomes for Scotland’s tourism sector; the news from the OBR forecast that the UK will not enter a technical recession and that inflation will fall to 2.9% by the end of the year will be met with relief.
“However, the announcement that the government will press ahead with an increase in corporation tax will be met with real concern and anxiety by many.
“A significant number of businesses within Scotland’s tourism sector are currently on a cliff edge with the continuing rise in the costs of doing business, taxation and impact of the cost-of-living crisis. Revenue is down, costs are up and inward investment is impossible; survival is looking bleak. The increase in corporation tax will be a burden too heavy to bear for many, which will end up costing the UK Government more in terms of lost tax revenue.
“There is however some good news with the announcement of £8.6M funding for Edinburgh’s festivals; a huge security boost to our increasingly financially constrained culture sector. This will allow improved planning and marketing of festival events and bolsters the appeal of Scotland as an international destination.
“Scotland's festival economy contributes more than £300m a year to the UK, so it’s heartening to see acknowledgement and recognition of the potential of Scotland’s tourism and culture sectors as future economic drivers for both Scotland and the UK.
“I know that many in the hard-pressed pub sector will welcome the announcement of the freeze on duty for draught products at a time of rising costs for all within the hospitality industry.
“The freezing of fuel duty and announcement of the extension to of the Energy Price Guarantee until June may offer some comfort to consumers and ease on domestic expenditure which could translate to the uptake of more leisure experiences within the tourism and hospitality sector.
“However, many businesses will be left disappointed that they will not receive an equivalent cap on their energy prices. Our recent Business Barometer highlighted that energy costs was the challenge most frequently identified by respondents.”
Scottish Chambers of Commerce: UK still needs a flexible and agile immigration system
Dr Liz Cameron CBE, chief executive of the Scottish Chambers of Commerce, welcomed some aspects of the Budget but said Scottish firms needed more.
She said: “Today’s news from the OBR that the UK is expected to avoid a technical recession this year is welcome but at the same time, the cost of doing business continues to hold back firms from growing and investing.
“The Chancellor’s statement today highlighted a major challenge facing the economy and that is the ever-tightening labour market and the growing demand for skills. Finding skilled workers is one of the top issues for businesses and the lack of available talent is preventing businesses from meeting demand and expanding.
“Measures to support the domestic workforce such as free childcare and return to work schemes are welcome but are unlikely to shift the dial quickly enough to address the immediate gap in the marketplace.
“That’s why businesses still need an immigration system that is agile and flexible to the needs of the economy. We have repeatedly said over the last year that Government must reform the Shortage Occupation List to help firms fill urgent job vacancies when they cannot recruit locally. Addressing this will unlock growth in the economy.”
On energy support, Dr Cameron said: “Whilst energy prices have stabilised, it remains a major concern for firms. It is therefore disappointing that the scaling down of energy support for businesses is still set to go ahead. Support for charities and leisure centres is welcome but removing the broader support fails to recognise that energy costs will continue to hamper SMEs across the economy. We urge the Chancellor to revisit this.
“The Chancellor’s confirmation of a £20bn government support package for Carbon Capture Storage (CCS) is welcome but there is a lack of clarity on whether the North-East of Scotland’s Acorn scheme will be backed. Providing detail now will be essential if we are to achieve the UK’s ambitions to net-zero and decarbonisation.”
On investment zones for Scotland, Dr Cameron said: “The announcement that there will an investment zone for Scotland is welcome and has much potential. We ask both the Scottish & UK Government to work proactively and quickly to ensure Scotland’s businesses can mobilise and fully realise the benefits of the scheme.”
Quantum Strategy could make country a 'science superpower'
Dr Graeme Malcolm OBE, CEO and founder at Glasgow-based photonics and quantum technology company M Squared, welcomed news of a national Quantum Strategy for the future of computing.
He said: “It’s still early days, but the signs for the Chancellor’s ambition of turning the UK into a ‘science superpower’ are looking very promising. The innovation sector needed to hear specifics on two key policy areas in today’s Spring Budget - investment in cutting-edge technologies and how funding will be distributed across the UK.”
“With the National Quantum Strategy, the Chancellor has certainly delivered on the former. The ringfencing of £2.5bn over the next ten years will be celebrated within the industry, and certainly takes us a step closer to realising the transformational potential of this new form of processing information. The UK has the world-leading research institutes, startups and scaleups needed to be a global leader in quantum - but the international race for quantum advantage is heating up, and so this funding provides welcome relief for the companies and academics at the forefront of maintaining our national competitiveness in this space.
“It was also encouraging to hear Mr Hunt recognise the importance of regional investment in innovation – it is city regions like Glasgow which have the world-class universities, skills and global supply chain companies needed to drive the UK’s economic recovery.”
Johnston Carmichael: Hunt went further than expected on pensions
Susie Walker, head of tax at independent accountancy and business advisory firm Johnston Carmichael, leads a team of more than 140 tax experts across the UK and internationally.
She said: “The pension legislation changes announced by the Chancellor are clearly designed to get people working longer across the country, as well as encouraging early retirees back into work to boost productivity and the economy.
“Many high earners – particularly in the NHS – have retired early on account of their pension funds being capped.
“Not only will there be a tax benefit for those returning to work and restarting their pension contributions, but those in existing employment will also now be able to add greater sums over their career.
“Mr Hunt went further than expected in deciding to abolish the lifetime allowance entirely, but he is clearly trying to address these wider issues and hopefully ease stress on our health service in the process.
“There weren’t many huge surprises in today’s statement, but businesses want certainty and stability, and the news that the UK main CT rate will increase to 25% whilst balanced by generous tax reliefs for investment spend will be welcome.
“Also, the news that the UK will not now enter a technical recession this year will be well received. Further tweaks to R&D tax relief improve the position from where it was heading with the Government’s clampdown against spurious claims.
“From a Scottish perspective, it is worth noting that the phased expansion of free childcare for one and two-year-olds only applies to England. It will be interesting to see how Holyrood reacts to that, as it currently doesn’t apply in Scotland.
“The extension of the energy price guarantee for a further three months, as well as the 5p cut to fuel duty on petrol and diesel remaining in place, are likely to prove popular.
“The Chancellor had a real focus on encouraging investment for growth, and that will be very positive for businesses, who will now be hoping that better times are ahead.”
Chair of the Scottish Discrimination Law Association hopes Budget will help people back into work
Musab Hemsi, director at Anderson Strathern and Chair of the Scottish Discrimination Law Association, said the Chancellor’s move to improve childcare and encourage people back into work could have positive effects.
He said: “Prohibitive childcare costs are a widespread reason why many women are unable to work, or work the hours to advance their careers.
“Paying childcare costs upfront, instead of the current refund system, has the potential to be a shrewd move in supporting families out of a cycle of debt and financial worry. The financial support appears conditional on claimants being supported by work coaches and skills bootcamps, to ease the effective transition back into work.
“Subject to efficient design of the scheme, I would be optimistic that certain sectors will seize the new opportunities announced today to utilise this support and attract working mothers to fill the continuing skills gap, and secure their wealth of transferable skills such as adaptability, resilience and flexibility for job market.”
Responding to the Chancellor’s support for older workers, he said: “Today’s announcement follows calls from the Chartered Management Institute last week who argued that the government should fund ‘help to hire’ bootcamps for small businesses to recruit and retain older workers, and findings by a House of Lords committee in December which found early retirement was the biggest driver of rising economic inactivity and labour shortages.
“The Government has recognised the increasing levels of economic inactivity may be linked to employees’ ill health, and provided intersectional Budget measures to create a supportive environment for over 50-year-old workers to return to the labour market.”
JLL: More needed to promote regeneration
Cameron Stott, head of Scotland at JLL, said: “This budget was always going to be about building credibility and providing reassurance to the financial markets. With this in mind, we welcome the Chancellor’s commitment of £320m of extra funding for the Scottish Government.
“It’s also encouraging to see a recommitment to investment zones in Scotland, especially given the strength of the country’s existing innovation and knowledge hubs, which are linked to our world-class universities which in turn impact every sector of the economy.
“The Scottish property market continues to lack a quality pipeline of sustainable commercial space and residential accommodation to fulfil demand. As the chancellor looks to stabilise and potentially return the economy to growth later in the year as inflation subsides, firms in Scotland will be keen to see the chancellor do more to attract investment to spur regeneration and new build activity alike.”
Scottish Financial Enterprise: We need a focus on Scotland’s world-class sectors
Sandy Begbie CBE, chief executive of Scottish Financial Enterprise, said: “The UK Government budget is taking place at a time when many households and businesses are struggling with increasing costs and an uncertain economic outlook.
“It is therefore welcome to see today’s budget taking a considered approach to support vulnerable households, increase workforce participation, and to lay some foundations for sustainable, economic growth in key areas.
“Continued support for energy costs, the use of dormant assets to support vulnerable customers, and action on prepayment meters, are welcome actions for those who are hardest hit by the current cost crisis. There has clearly been some meaningful consideration of the reasons that different groups of people are leaving or not returning to the workforce, and the government’s plan to address this issue through varied measures like the increase of tax-free allowances for private pensions and increased childcare support will be helpful to improve workforce participation and boost productivity.
“On the economy and business, additional support for carbon capture, plans for at least one investment zone in Scotland, support for the festivals in Edinburgh, and tailored programmes of tax relief and incentives, are useful targeted actions for key sectors and the development of regional economic growth plans.
“Overall, this budget signals a constructive long-term approach to changes needed in our economy and aligns with many of the priorities we have been calling for. In time, we would like to see greater ambition and more incentives for businesses to invest, not only in machinery and technology, but also in areas like net zero transition, greater inclusion, upskilling and reskilling. We are not yet seeing the level of strategic ambition in these areas as in other advanced economies around the world who are competing internationally for the same private sector capital investment.
“We know these priorities are also important to the Scottish Government and this is an opportunity for a renewed focus on collaboration and engagement between both governments and with business to help address some of the significant structural challenges Scotland faces, such as low productivity and skills gaps.
“That must include a focus on Scotland’s world-class sectors, including financial services, where we have significant opportunities for growth and innovation, as well as the creation of highly skilled, well-paying jobs.”
Tech investor welcomes R&D tax changes
David Ovens, joint managing director of Edinburgh-based tech and life sciences investment firm Archangels, said: “We welcome the UK Government’s decision to reverse cuts to the R&D tax credit regime for small businesses. These credits will continue to play an important role as a source of cash for early stage, often loss making, companies, particularly in the technology and life science sectors.
"Combined with the Government’s plan, unveiled last week, to make the UK a beacon of science, technology, and innovation, there are promising signs that our policy makers are beginning to realise the potential of these sectors to our prospects for economic growth.”
PwC - will Budget lead to calls for a North East investment zone?
Sharon Blain, Tax Director at PwC Scotland, said: “From a Scottish industry and business perspective, this was a Budget of two halves. On one hand, the ‘credit’ system for R&D investment in the life sciences and creative industries - which are burgeoning sectors north of the border - will be welcomed with open arms in areas like the Advanced Manufacturing Innovation District near Glasgow Airport and Dundee’s thriving gaming industry. On top of this, the £8.6million of funding already announced for the Edinburgh Festivals will be seen as a welcome boost for Scotland’s creative sector.
“Scotland’s wider industrial and manufacturing sector also stands to benefit from what is a significant policy shift announced by the Chancellor, in the shape of full tax expensing of qualifying capital spend for at least the next three years. By rewarding investment in tech, plant and equipment, the Chancellor is playing to some of our real growth sectors north of the border.
“Another surprise was the notable absence of any reference to Scotland - in particular the North East - as a focus area for the newly announced £20 billion investment to support carbon capture and storage over the next 20 years. With 50,000 jobs being created while reducing the country’s impact on the environment, it represents an important first step towards building a greener jobs market. It’s disappointing that a region which was highlighted in our last Green Jobs Barometer report as having the largest pool of energy-related skills -which are highly transferable to the renewables sector - was not highlighted in connection with the investment.
“This may lead people to renew calls for the yet-to-be-named Scottish investment zone to be positioned in the North East, particularly following the announcement of Glasgow as one of the Government’s ‘high potential innovation clusters’ which will benefit from a share in £100 million of funding.”
KPMG: Budget will show new SNP leader what Conservatives are planning
Vishal Chopra, Scotland head of tax at KPMG UK, said: "Today’s Budget reflected a calmer footing when it comes to public finances than last Autumn’s, a situation which has resulted in no significant tax rate cuts or tax rises, but which did include some clear incentives for businesses investing in their futures.
“The Chancellor gave an upbeat forecast on inflation and announced that a technical recession was now not likely this year, news which will be welcomed by businesses and individuals.
“With an ongoing leadership race for Holyrood’s top job, this Budget gives the incoming First Minister an indication of how a new look Conservative leadership is approaching the economy.
“In terms of business taxes, the planned increase to the mainline Corporation Tax rate to 25% is going ahead despite concerns over the impact that this may have on UK competitiveness and investment.
“The big news in corporate taxation focused on capital expenditure where full expensing for qualifying spend on plant and machinery for the next three years has been introduced, as well as an enhanced tax credit in the R&D regime for certain small and medium sized enterprises.
“The Chancellor confirmed plans for an investment zone in Scotland with a focus on growth in five key sectors: life sciences, creative industries, digital technology, advanced manufacturing, and green industries where Scotland already has glowing credentials.”
Mr Chopra also welcomed news of extra funding for Edinburgh's festivals.
He said: "The £8.6m of funding for Edinburgh’s festivals will undoubtedly be a boost to one of the world’s leading cultural brands and stimulate growth to the wider culture sector in Scotland, as well as increasing employment opportunities.
“This was a quiet Budget in terms of other taxes such as VAT and duties, and personal taxes. It was a Budget marked by stability and hints towards continuing to support positive signs of financial improvement ahead of an election in the next 12 to 18 months.”
HR firm People Puzzles says childcare move is promising
Kathryn Hume, who lives in Ayrshire and is Scotland regional director of HR specialist People Puzzles, said: “Any initiative which helps to enable more people – be they a parent or not – to enter and progress in the workplace, is of course a positive and welcome move.
“Our clients tell us over and over again that recruitment and retention of skilled employees is one of their biggest challenges, so an announcement like this will doubtless be viewed as helpful.
“In our Business Leaders survey in 2022, 56% of respondents said recruitment and retention was their biggest people challenge.
“However, the precise detail of how it is implemented will be critical, and indeed, whether there is enough resource out there to provide the level of childcare needed by so many families across Scotland and around the UK.
“As an HR business, we would also emphasise to employers that they need to continue to explore other ways in which they can support working parents – whether that’s through flexible working, parental leave, or something more bespoke to that business and its sector.”
Scottish Widows welcomes pensions changes
Pete Glancy, head of policy at Scottish Widows, said on the abolishing of the Lifetime Allowance: “Abolishing the Lifetime Allowance is a welcome development from today’s Budget and something we’ve been advocating for a number of years. The LTA was designed for a bygone era of low inflation and steady wage growth.
“Recently, it penalised savers who exceeded the threshold with a punitive tax penalty of 55%, even if their pots simply keep pace with rising prices. This drove senior professionals out of the workforce, draining the economy of much-needed skills, experience, and productivity.
“Its removal will improve the fortunes of both working people and the public purse. Bigger pension pots not only mean more money for people to spend in retirement, they also mean higher tax receipts in the long run as the extra retirement income is also subject to taxation.”
Scottish Friendly - households still need Government support
Kevin Brown, savings specialist at Scottish Friendly, said: “The government was left with little choice but to keep the energy price cap at £2,500 for another three months to help suppress households’ energy costs.
“From April, families will no longer receive the £66 discount on their bills, so it was vital to extend the cap and help protect families from another sharp rise in costs.
“Households continue to grapple with the biggest squeeze on living standards for a generation. Double digit inflation is decimating workers’ income and the government must maintain support for families until conditions significantly improve.
“As the Chancellor outlined today, getting more people back into work is a major priority to help boost the UK’s economic growth. But while inflation remains high and incomes continue to fall in real terms, encouraging people to return to the labour market is going to be a challenge.
“There are signs of brighter days ahead this year, but we are not out of the woods yet and it’s important that the UK’s finances aren’t prioritised ahead of family budgets.”
Pensions changes welcomed by M&G Wealth
Les Cameron, Scotland-based head of technical at M&G Wealth, welcomed the abolition of the Lifetime Allowance.
He said: “What we need to know now is the detail of how this will be implemented as the Lifetime Allowance limit is referenced in many different areas of pension legislation affecting amongst other things the amount of PCLS that can be paid.
“Thinking more widely, this should see a reduction in attractiveness of other tax-incentivised vehicles, such as venture capital schemes, which were the natural go-to places for those who’d had their pension funding limited by the Lifetime Allowance.”
Mr Cameron also welcomed the changes to annual allowance limits.
He said: “The increase to the annual allowance limits will clearly be welcomed by those who have been most impacted, predominately those on higher incomes and in defined benefit pension schemes. It also gives additional scope for those with defined contributions schemes to make increased contributions. With the Corporation Tax change rumours unfounded, this increase will be particularly welcomed by SME business owners with the potential for higher rates of corporation tax relief next year.
“In terms of impact the increase from £40,000 to £60,000 means that in 2023/24 a member of a defined benefit scheme can see their pension increase by £3,750 instead of £2,500 before breaching the allowance. A tax saving of £8,000 for higher rate taxpayers.”
RBC Brewin Dolphin welcomes cost of living and pensions changes
Daniel Hough, financial planner at wealth manager RBC Brewin Dolphin in Glasgow, said: “The chancellor set out a range of steps to try and bring down the cost of living in today’s Budget. In particular, the continuation of the energy price guarantee will help households with their monthly energy bills, while the measures on fuel duty should also keep petrol prices on their downward trajectory.
“For savers, abolishing the lifetime pension allowance and increasing the annual allowance from £40,000 to £60,000 are excellent news. Not only will these steps potentially help bring people back into work, they will incentivise those currently employed to save what they can for retirement without the worry of exceeding tax thresholds.
“The reform of childcare costs should also help parents with younger children move back into work, supporting the economy further. For many people, the cost of childcare was so high it made sense to stop working, either altogether or deciding to cut back on how much they worked before. It will also allow those who decide to go back to work to start accruing pension savings again for retirement, as well as boost their incomes in the here and now.”
