Image credit: UK Parliament
The UK’s F&B sector had been highly anticipating the Spring Budget 2023 from the Chancellor of the Exchequer, Jeremy Hunt, which was announced today (15.03.2023).
As the industry continues to face the impact of high inflation and concerning labour shortages amidst the ongoing cost of living crisis, more support for domestic food production had been a major priority, which NFU President Minette Batters called for last week. The hospitality sector had also demanded new reforms to licensing and planning, business rates and the apprenticeship levy, to help bring more talent to the sector.
While not all the industry’s issues were addressed, these are the new incentives from the Spring Budget 2023 which will impact the sector the most:
The ‘Brexit pubs guarantee’
Labelled the ‘Brexit pubs guarantee’, the Draught Relief duty has been extended from 5% to 9.2% for draught pints of beer and cider in pubs across the UK. This means from 1 August 2023, the duty on these drinks will be 11p lower than in supermarkets. The drinks must be sold from draught containers of over 20 litres to be eligible for duty relief.
Due to the recently agreed Windsor Framework, which is set to resolve the issue of moving goods between the EU single market and the UK, the lower duty will also be applied to all pubs in Northern Ireland, Hunt said.
Tax on other alcoholic drinks however is still set to soar in the summer, with the duty on wine expected to see the single biggest increase in almost 50 years, according to the Wine and Spirit Trade Association.
Support for SMEs
While cuts to R&D tax credits for SMEs are still going ahead, the Chancellor did announce a new tax support scheme for companies working in research-intensive sectors such as life sciences and AI. If eligible companies spend 40% of their capital on R&D they can claim back £27 for every £100 spent.
Corporation tax rise confirmed
While Hunt confirmed corporation tax will go up from 19% to 25% for organisations that earn more than £250,000 in profits, he estimated only 10% of all businesses in the country would actually have to pay this full rate. In addition, he also announced the introduction of a new scheme, the full capital expensing, where every pound a business invests in IT equipment, plants or machinery will be paid back to them in full by the Government. This programme will be short-lived however, running for only three years.
£900m investment in AI research
In a bid to turn the UK into a leading AI research hub, the Chancellor announced the Government’s plans to put £900 million towards Artificial Intelligence research and to building an exascale computer (China, Japan, the EU, US, Taiwan and India are the only other places worldwide to have this technology.)
Some £2.5 billion is also being invested into a 10 year quantum research and innovation programme, where a £1 million prize will be granted each year to any person or team who is able to produce the most groundbreaking AI research.
Apprenticeships for older workers
With approximatley 3.5 million people over the age of 50 being out of work in the UK, Hunt has introduced an apprenticeships scheme for older workers, called ‘Returnerships’. Existing apprenticeships will be adapted to make them more accessible to over-50s, and help them develop the necessary skills and support to help them get back into work.
‘Great British Nuclear’ and carbon capture
In light of the ongoing war between Russia and Ukraine and the impact it has had on the UK’s access to energy, Hunt also discussed the Government’s intention to increase the country’s dependency on nuclear energy in a bid to move away from fossil fuels. While subject to consultation, if the Government can classify nuclear power as ‘environmentally sustainable’, it will be able to qualify for the same investment incentives as renewable energy. This, Hunt said, will help the country move towards achieving ‘Great British Nuclear’, enabling it to have a fourth of its energy coming from nuclear power by 2050.
Up to £20 billion in support is also going towards developing carbon capture, usage and storage (CCUS) across the UK, with the Government aiming to capture between 20 to 30 million tonnes of carbon annually by 2030. CCUS projects are expected to begin on the East Coast, Merseyside, and North Wales, and are predicted to create around 50,000 new jobs.
Andrew Goodacre, CEO of the British Independent Retailers Association (BIRA) said of the Spring Budget: “The Chancellor was upbeat about the economy in that we are likely to avoid a recession and forecast growth is better than expected. We wanted to hear about plans for growth and we were told about new investment zones, increased capital tax allowances for business investment and £200M in local regeneration.
“These are positive measures but long term are not necessarily addressing the challenges faced by businesses on the high street today.”
“We were not expecting much from the Budget today and while we are pleased with the focus on growth, many of the big announcements are focused on long term investment,” he continued.
“We hope that the better economic forecasts, and more people returning to work will improve consumer confidence – often the key driver for high street economic growth. Unfortunately though there was nothing to ease the fears of indie retailers dealing with the pressures of today.
“The pressures of inflation, high energy costs and energy support set to reduce by 95% in April, and wages set to increase by 9% in April. This budget may improve consumer confidence, but it does little to boost the confidence of businesses on the high streets throughout the UK,” he added.