We expected a Budget with a strong emphasis on supporting the UK being “open for business”. The Chancellor did indeed talk about building the most competitive tax system in the world and of a desire to support the entrepreneurial spirit in the UK. He backed this up by announcing that corporation tax would come down to 20% and by giving more support for research and development (R&D).
He also announced an employment allowance for the first £2,000 of a company’s National Insurance bill which will benefit all businesses, particularly small and growing businesses, wanting to take on staff.
One more thing he committed was to spend more than previously planned on infrastructure (by around £3bn a year from 2015 onwards) which could provide some medium-term opportunities for businesses in the construction sector. It could also help to close the “infrastructure gap” between the UK and the Asian Tigers (see Figure 4).
Even though the Budget was presented as being fiscally neutral, the latest OBR forecasts show that the projected total public debt stock in March 2018 is now £103 billion more than expected at the time of the Autumn Statement in December. So the Chancellor is allowing the public debt stock to continue to climb, pushing back the date at which the debt ratio peaks by a further year to over 85% of GDP in 2016/17.
Overall, we expect the Budget measures to have a modestly positive impact on business confidence and growth in 2014-15, but they are not large enough to produce a major change in the UK economic outlook.