20th March 2023

4 minutes reading time

Blackfinch response to the Spring Budget 2023

The Autumn Statement 2022 set out a clear plan to get debt falling as a share of the economy in the medium term. Today, Jeremy Hunt and the UK Government outlined their Spring Budget, beginning with the encouraging news that the Office for Budget Responsibility (OBR) confirms the government is on track to achieve this aim, with the debt to Gross Domestic Profit (GDP) fiscal rule met in 2027-28 with headroom of £6.5 billion and borrowing falling in every year of the forecast.

Mr Hunt continued to build on this, by announcing his budget for growth that was aimed at reducing barriers to business investment, employment and science and technology leadership.

Key Take-aways

  • Subsidies that limit typical household energy bills to £2,500 a year will be extended for three months, until the end of June, and equal charging for energy will be applied to payment metre customers as well as those paying by direct debit.
  • There will be a £20bn investment into carbon capture, storage and usage to help secure the UKs domestic sources of energy alongside a drive to achieve 25% of electricity from nuclear sources by 2050.
  • The pensions lifetime savings allowance - currently £1.07m - will be abolished.
  • The pensions annual savings allowance is to rise from £40,000 to £60,000.The 5p cut to fuel duty on petrol and diesel will remain for another year.
  • Corporation Tax, paid by businesses on taxable profiles over £250,000 will increase from 19% to 25%.
  • Companies will be able to deduct investment in new IT equipment, plant machinery and technology to lower their profits liable to tax.
  • There will be a £2.5bn investment to enable the UK to become a quantum enabled economy by 2033, to support the rapid increase in demand for Artificial Intelligence (AI) technology. Initiatives were also announced to support sandbox trials and improve clarity on Intellectual Property (IP) rules to help AI companies access the material they need.
  • Tax breaks and other benefits for 12 new Investment Zones across the UK, funded by £80m each over the next five years, to emulate the success of the Canary Wharf and Liverpool Docks transformations.

Blackfinch Insight

Despite continuing global instability, the OBR forecast today that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023, a significant reduction in inflation. This is a promising indicator for potential economic growth and we are encouraged by the government’s commitment to the role that private investment can play in the recovery from the post-pandemic era.

According to the Department for Business Energy & Industrial Strategy, the number of private sector businesses in the UK at the start of 2021 was 5.6 million. Of these, 5.5 million businesses were ‘small’ (0-49 employees), 35,600 businesses were ‘medium-sized’ (50-249 employees) and 7,700 businesses were ‘large’ (250+ employees). In other words, here in the UK, SMEs account for 99.8% of the business population.¹

The UK remains one of the best places in the world to launch and grow an ambitious start-up. Out of Europe’s top 1,000 high-growth start-ups, 319 are UK-based, whereas second-placed Germany has 149². The tax incentives available through Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS) are undoubtedly one of the reasons for this success, they leverage private capital to supercharge high potential companies.

For investors, this doesn’t just mean 30% upfront tax relief and strong return potential – it also means helping the UK’s brightest entrepreneurs to build a better future.

In Blackfinch Ventures, we invest into a diversified portfolio of exciting technology firms with high growth potential and a proven product concept. So the desire to provide clarity on IP regulation is welcomed as this can be an important part of securing the intellectual rights and competitive market edge when developing new technology solutions.

It’s also interesting to hear about sand-box initiatives to support origination of more AI-based organisations and ideas, alongside the quantum economy, which will undoubtedly play an important role in businesses as we move forward.

We hope that the wish to create a pro-business, pro-enterprise taxation regime, coupled with investment into regional growth hubs around the UK, results in more entrepreneurs and fearless founders coming to market with concepts that can disrupt and transform industries for the better.

And in support of business growth, the Chancellor also spoke passionately about employment and helping those from all areas of society to enjoy a fulfilling work life, including additional support packages for those with young children, those with disabilities and those who are older. For our retail investors, the changes to pension taxation allowance is possibly the most surprising change associated to this point.

At Blackfinch we recognise that a pension is one part of an investors portfolio, alongside a wide range of other options. As we move through various life stages, our needs change and our plans for our finances must adapt to help us to thrive as individuals. We are proud to work alongside the financial advisers around the UK, supporting them with investment solutions that can help people achieve their investment objectives.

Whether that’s planning for a retirement that may now come later, saving for private education, planning a house purchase or maybe thinking about the cost of care solutions for elderly. When the world around us changes, we work with those changes to provide a variety of solutions that vary in both risk, returns, types of asset classes and minimum holding terms.

¹ https://www.gov.uk/government/statistics/business-population-estimates-2021/business-population-estimates-for-the-uk-and-regions-2021-statistical-release-html

² https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/winning-formula-how-europes-top-tech-start-ups-get-it-right