What do businesses want from the Autumn Budget?

As we approach the 2021 Autumn Budget, which Chancellor Rishi Sunak will deliver on 27 October, the demands from business groups have already begun.

VAT rate freeze for tourism and hospitality?

The hospitality and tourism industry has already requested a freeze on the rate of VAT to aid its recovery from the Covid-19 pandemic.

VAT for pubs, restaurants, holiday accommodation and admission to certain attractions rose to 12.5% on 1 October, following a temporary cut to just 5% that was introduced in July 2020 to help businesses struggling as a result of the pandemic. Under the Treasury’s current plans, VAT on hospitality and tourism sector purchases will rise again to the pre-pandemic level of 20% in April next year.

A letter signed by the heads of UK Hospitality, the British Beer and Pub Association, the British Institute of Innkeeping, Tourism Alliance and the Association of Leading Visitor Attractions stated: ‘Businesses are at a perilous stage of their recovery after what’s been a devastating 18 months. Costs are increasing and there are numerous operational challenges for them to deal with, specifically around labour and product supply. A reduction in VAT has helped many of our businesses survive to this point and was most welcome.

‘However, the return of VAT to its pre-pandemic level next year would curtail investment, restrict growth, set back our tourism recovery and risk yet more painful job losses.’

The UK’s trajectory

The hospitality and tourism industry’s plea followed a list of recommendations made by the Confederation of British Industry (CBI).

The CBI says corporate cash reserves are now over £900 billion, creating ‘a wall of investment waiting to be invested’. However, it says the government must create the right environment to unleash it.

The decisions made this Autumn at the Budget and Comprehensive Spending Review will define the UK’s trajectory for the decade ahead, the CBI adds.

The CBI recommends

Smart taxation that rewards investment:

• ‘Green’ the tax system and pledge no further increases to the business tax burden to safeguard UK status as a leader in attracting global investment
• Introduce full expensing for capital expenditure beyond 2023 and targeted ‘green’ investment-focused capital allowance mechanisms
• Reform outdated business rates to reflect green ambitions and reward decarbonisation efforts
• Boost the structures and buildings allowance to incentivise sustainable construction

New skills for new markets:

• Turn the Apprenticeship Levy into a Lifelong Learning Levy to unlock business investment in training.
• Turn Job Centres into regionally autonomous Jobs and Skills Hubs to encourage more people to take up lifelong learning and enable closer alignment with changing local jobs markets
• Introduce individual training accounts for unemployed individuals
• Address skills shortages by removing barriers to recruitment

Catalytic public investment:

• Prioritise the UK establishing itself in new and emerging markets by speeding up the development of major infrastructure projects, new industries, and cutting-edge tech
• Designate energy efficiency and heat as a national infrastructure priority
• Provide long-term funding to decarbonise UK transport systems and develop a UK electric vehicle market
• Commit to a new Giga factory plan to deliver increased capacity by 2040

Government as market maker:

• Deliver on commitments to invest £22 billion in direct domestic R&D funding by 2025
• Grow investment in business-led innovation, while requiring regulators to prioritise innovation, net zero and investment as part of core remits

Once-in-a-generation opportunity

The CBI says the Autumn Budget is a once-in-a-generation opportunity to change the UK’s productivity and growth trajectory, so the government must do what it takes to rapidly unlock private sector investment.

However, failure to act will impact the UK’s recovery and ability to level-up. In addition, inaction risks seeing the UK fall behind competitors, lose international investment and miss out on its global commitments on net zero.

So, all eyes will be on Chancellor Sunak on 27 October to see what he delivers, who he will please and who he will disappoint.

Keeping your clients informed

Our comprehensive Budget Summary will be available to you the following day in various formats, from printed to PDF and flipbooks to video.