Autumn Budget – what does this mean for the legal sector?
In the Budget announcement in late October, Rishi Sunak set out the agenda for long-term economic recovery following the pandemic. Mike Stevenson at Iceberg breaks down the statement’s implications for SME legal.
The tone of the Chancellor throughout the announcement was vastly optimistic. Sunak delivered a raft of new pledges and public spending commitments, while heralding the strength of the post-pandemic economy.
But what are some of the key takeaways from the announcement for UK legal small and medium enterprises (SMEs)?
Economic outlook positive for UK SMEs but inflation remains a concern
The Chancellor confirmed that the economy is forecast to return to its pre-pandemic level at the start of the next year, with 6.4% growth planned by the end of 2021.
Unemployment is also at a lower le vel than it was initially forecast. In July, unemployment was predicted to peak at 12% – as opposed to an expected peak of 5.2% today. The Office for Budget Responsibility Forecast for business investment has also gone up.
Despite this optimistic outlook, the current landscape remains challenging for UK businesses in the legal sector, with many navigating factors such as inflation, the end of the furlough scheme and staffing challenges.
The Chancellor conceded that inflation was 3.1% in September and is likely rise even further, to an average of 4% in the next year, but confirmed that he is working closely with Bank of England to implement a strategy to manage inflation.
Business rates
The Chancellor announced a range of business rate cuts, with the biggest discounts applying to industries most impacted by Covid-19. However, businesses across all industries will be able to make improvements to their premises and pay no extra tax until 2023.
A new investment relief will also be launched to encourage investment in technologies like solar panels – although more information will be revealed about this at a later date. The Chancellor confirmed that business rates will now be re-evaluated every three years.
Rise to the Minimum National Living Wage
Sunak also confirmed a 6.6% increase to the National Living Wage to £9.50 an hour, from April 1 2022. This measure is being introduced as part of a £6 billion package to support the labour market, including investment into developing skills and a reduction of the taper rate for Universal Credit.
This pay increase aims to support millions of low-paid workers. The government is also increasing the National Minimum Wages, so young people and apprentices will also see pay increases.
Levelling up by helping businesses to innovate and grow
A range of new measures have been announced to support local and innovative businesses across the UK, as part of the government’s ‘levelling up’ agenda. The government is also reinforcing efforts to ensure small and medium sized enterprises (SMEs) can access the finance they need, wherever they are across the UK.
An additional £150 million has been committed to the UK-wide Regional Angels Programme, which aims to reduce regional imbalances in access to early stage equity finance for small businesses. The British Business Bank’s (BBB) Regional Funds have been extended into the North East and South West of England, with additional funding secured to set up new funds in Scotland and Wales, and to build on existing programmes in Northern Ireland.
There will also be continued funding for the Start Up Loans Scheme, which provides loans and mentoring to people across the UK who want to start a business.
Apprenticeships
There is good news for firms that employ apprentices. The government is increasing apprenticeships funding to £2.7 billion by 2024-25. As part of this, it is continuing to meet 95% of the apprenticeship training cost for employers who do not pay the apprenticeship levy, while also delivering a range of new measures.
These include an enhanced recruitment service for SMEs, helping them hire new apprentices, and new flexible apprenticeship training models.
By Spring, the government will also consider changes to the provider payment profiles aimed at giving employers more choice over how the apprenticeship training is delivered. It will explore the streamlining of existing additional employer support payments so that they go directly to employers. It is also introducing a return on investment tool in October 2022 to ensure employers can see the benefits that apprentices create in their business.