The chancellor, Philip Hammond, has today announced a raft of initiatives for creating a digital economy – but at the same time economic growth prospects for the UK were downgraded.
Delivering his second budget to the House of Commons, Hammond announced £500m for 5G mobile networks, fibre broadband and artificial intelligence and a further £2.3bn allocated for investment in research and development.
He also pledged £540m to support the growth of electric cars, including more charging points, and income tax to be applied from April 2019 on digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction.
The government also said that the VAT threshold for small businesses would remain at £85,000, the highest in Europe, for two years, the highest in Europe, and that rises in business rates would be pegged to CPI measure of inflation, not RPI.
But, the growth forecast for 2017 was downgraded from 2% to 1.5% by the OBR and GDP was downgraded to 1.4%, 1.3% and 1.5% in subsequent years, before rising to 1.6% in 2021-22. Annual rate of CPI inflation was also forecast to fall from a peak of 3% to 2% later this year.
Commenting on the budget, Ian Smallwood, Head of Business Development at Business East Sussex, said he was pleased there had been support for SMEs with regards to the VAT threshold. It had been widely predicted that this would be cut to raise income for the nation’s coffers.
Smallwood said: “SMEs are the lifeblood of the UK economy and they are vitally important to the county of East Sussex. I’m pleased that some predicted regulatory burdens have not come to fruition and here at Business East Sussex we welcome anything that can improve our drive for digital businesses. Also there is some relief on SBR, particularly for pubs, which is an important element of the rural make-up of the county.
“We’re particularly pleased that the government is allocating a further £2.3 billion for investment in R&D and will increase the R&D Tax credit by 12%. And we’re pleased the government is starting to address the skills gap, particularly with the construction industry, which is an issue in the county.
“Overall this is a business friendly budget despite the economic uncertainty we face ahead of Brexit.”
Elsewhere in his budget, Hammond announced:
- £320m to be invested in former Redcar steelworks site
- Second devolution deal for the West Midlands
- £1.7bn transport fund for city regions
- £2bn for Scottish Government, £1.2bn for Welsh Government and £650m for Northern Ireland Executive
The government also announced a raft of measures to boost the construction industry, in particular the housing situation, and it pledged £44bn in government support, including loan guarantees, to boost construction skills.