Overall proposals for business do not quite match the Chancellor’s rhetoric. Lower energy bills will have the most significant immediate impact, improving competitiveness of many businesses. Over the medium term, support for exporters, the sector initiatives and the investment allowances should positively improve the economy but it is not clear that the combined impact will be significant.
Export policy looks at picking winners but challenges remain
The Chancellor announced a number of initiatives to support exporters of which the two most significant were further resources for UKTI and a doubling of the funding available for Export Finance to £3 billion at a new lower interest rate. The Chancellor said this would be the most competitive scheme in Europe and it does appear to offer real benefits especially to small and medium sized exporters and aspiring exporters. However the OBR’s forecasts for trade are relatively muted showing how challenging and competitive export markets are likely to remain.
Potentially more significant over the medium term could be what the Chancellor called an “industrial strategy”. It appears concern over “picking winners” has gone away and the Chancellor identified three key initiatives to support development of UK capability in graphene, Cell therapy and Big Data, the later through the creation of the Alan Turing Institute. The lessons of recent years are that export success is about more than price and building capability, with a supply base critical. If the UK has chosen well, there could be significant future benefits to export performance.
Doubling capital investment boosts SMEs rather than transforming manufacturing
The proposals to extend for three more years the tax and business rate benefits to Enterprise Zones are positive and should help the UK regions. Doubling the capital investment allowance to £500k should provide a boost to business investment. However this is likely to be of most benefit to small and medium sized businesses, larger companies invest significantly more than the threshold. Overall while support to manufacturing is welcome, the initiatives announced are unlikely to change dramatically the size and performance of the UK manufacturing sector.
£7 billion saving for energy intensive industries most welcome
The announcements to changes in energy taxation will have a more significant impact, resulting in a reported £7 billion cost saving to energy intensive industries, this possibly undermines the Conservatives Green Credentials putting growth ahead of sustainability but should support increased industrial sales.
Infrastructure policy unlikely to impact growth
The Chancellor stated that the UK has underinvested for a long period but his announcements on infrastructure for the Mersey Bridge extension and road and flood defence repairs were small in the context of the UK Infrastructure Plan of £375 Billion. The proposals announced are unlikely to have any significant impact on growth and business has to wait for the Chancellor’s promised Autumn update on future infrastructure spending to see if more ambitious schemes are being considered.