Yesterday’s Budget outlined the foundation to prepare for a “new age of optimism”. And while the Chancellor warned of challenging months ahead, he set out his vision for a post-pandemic Britain, pledging to begin the work towards a stronger economy.
1. Inflation is rising – soften the blow by utilising higher rates
The Chancellor revealed the inflation forecast, announcing a sharp surge from the OBR’s last forecast of 3.1% in September, to an average of 4% over the course of 2022.
Sunak signalled his support for an interest rate increase by reminding the Bank of England of their commitment to keep inflation low.
Given the prospect of interest rate hikes, it is now more important than ever to avoid hoarding cash in low paying accounts, in order to maximise returns and minimise the impact of inflation. Find out how you can seamlessly manage your cash portfolio by speaking to us today.
2. Promises for significant capital investment
In a bid to get “growth up, jobs up, and debt down”, plans for a large spending increase in infrastructure and research and development (R&D) were unveiled, representing the fastest ever cash increase in R&D spending at 50%.
This marks the first round of bids from the Levelling Up Fund with £1.7bn invested in the infrastructure of over 100 local areas, including Aberdeen and Sunderland.
Also announced were plans to expand the scope of R&D reliefs to include cloud computing and data costs. This change in the rules speaks to Sunak’s plans to raise productivity and skills for a modern world.
3. New four fiscal rules introduced
To “keep this government on the path of discipline and responsibility” – or in other words – to keep a lid on debt and borrowing, four new fiscal judgements were outlined:
- Meet fiscal rules with a margin to protect against economic risks.
- Continue to support working families.
- Meet the obligations of the world’s poorest people, reinstating a spend of 0.7% of national income on overseas aid by 2024-25.
- Increase total departmental spending by £150bn (3.8%) on average per year this Parliament.
4. Rebuilding the hardest hit industries post-COVID
It’s no secret that some industries were hit harder than others over the past year. To support beloved pubs, music venues, cinemas, and restaurants, the Chancellor announced a 50% discount on business rates for the retail, hospitality, and leisure sectors.
This is the biggest single-year tax cut to business rates in over 30 years, equating to a total of £7bn.
5. Challenger banks are given a helping-hand with annual allowance boost
The Chancellor confirmed a reduction in the surcharge on banks from 8% to 3%.
Stating they are “improving banking competition, which is good for the sector and good for consumers”, Sunak also offered a break for small challenger banks by raising the annual allowance from £25m to £100m. This means they escape the surcharge until they pass the allowance in profits.
To learn about the savings landscape for SMEs, download the State of the Deposit Market for UK SMEs Report.