What should business and the financial sector in particular make of today’s Budget?

The FLA has called for support for business to be maintained through the crisis and for the restoration of public finances to be phased in gradually.
The headlines will no doubt focus on the increase in Corporation Tax. However, overall there is much in the proposals for business to welcome. The Chancellor has respected the primary need to foster economic recovery.  Much of the support provided to business is being maintained for the rest of this year.
At the same time business, again including the FLA, has called for support for investment to kick-start the economy.  The introduction of the UK Infrastructure Bank, support for SMEs to help them take advantage of digital technology, and the super-deduction offset of investment in plant and machinery against tax should provide a significant boost to business investment, and encourage that investment to take place in the UK rather than overseas. With some limited exceptions, such as the fuel duty freeze and mortgage guarantee, it is a Budget for sustaining business and incentivising investment rather than a Budget which seeks growth through boosting consumption: a welcome shift from the UK’s traditional road map out of economic meltdown.
As usual, however, there are gaps in the plans that need to be plugged and key details that need to be filled in.
The CBILS loan guarantee scheme is being replaced by a Recovery Loan Scheme. But this is just an interim measure for this year. Business needs a permanent replacement. It should bring together the best of earlier British Business Bank schemes with some of the successful innovations in CBILS.  We need a scheme that will bring forward investments in productivity improvements over the long term.
There is also more to be done to encourage investment in attaining net zero than the Government has so far done. Policy needs to be developed in more detail and then adhered to consistently to provide a more certain environment for investment.
Crucially the flagship super-deduction tax break needs to be available to businesses however they are funding their investments in plant and machinery, whether through cash, loans or asset finance. It is right that business will benefit from the tax incentive irrespective of the funding mechanism which best suits its circumstances.
Thanks to the vaccine, the economy should soon start to reopen. This Budget provides a number of stepping stones to assist recovery, to restore fiscal strength and to build our long term, sustainable economic capacity, but it still leaves plenty to be done.

Published 03 Mar 2021

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