The Chancellor Rishi Sunak delivered his Spending Review today.
He told the House Of Commons that unemployment is set to rise to 2.6 million by the second quarter of 2021; and the government is set to borrow £394bn this year, to tackle the economic crisis brought about by the global pandemic.
Mr Sunak also told MPs the economy is predicted to contract by 11.3% and grow by 5.5% next year and 6.6% in 2022; and the plans didn’t include any tax changes but these will need to rise to offset the borrowing, in due course.
Business Leaders have been reacting and talking to us about their thoughts on the review.
Dr Joe Marshall, Chief Executive of the National Centre for Universities and Business (NCUB), said comments on how research is being supported: “The Chancellor has today taken a positive step forward, committing to spending almost £15 billion on research and development (R&D). He has rightly acknowledged that R&D is paramount in the nation’s recovery from Covid-19.
“Whilst almost all announcements made today offered funding for one year only, the Chancellor sent an important signal of the importance of steady, long-term funding for research. He made a multiyear commitment for an uplift of more than £400 million on average for UK Research and Innovation per year for the next three years.
“For every £1 spent in R&D, £7 is made in economic and social benefits from helping to attract investment, boosting productivity and creating new jobs. The Government have put their money where their mouth is and seem understand that to if they are realise their own ambition for the UK to be a ‘science superpower’ we need this continuous investment in research.”
Nigel Morris, employment tax director at MHA MacIntyre Hudson, says Sunak failed to deliver for businesses: “More help for businesses is essential to protect our economy, yet we saw no major support made available for them, for example a cut in employers’ national insurance payments, or restoration of the £1,000 Job Retention Bonus for keeping on furloughed staff.
“The increase in the National Living Wage is great news for employees, as is its extended age range, which means employees now qualify from age 23, but this puts more pressure on stretched employers to fund wages and associated national insurance costs.
“If the £3bn investment in the Restart Scheme delivers on its aim to help one million people, it will really help soften the blow of job losses resulting from the pandemic. Rishi Sunak’s focus on protecting lives and livelihoods is much welcome, but we need the right balance between support for individuals and the companies that employ them.”
Nimesh Shah, CEO at leading tax and advisory firm Blick Rothenberg comments: “As widely leaked before today’s statement, public sector will be frozen, other than for lower paid workers and medical staff in the NHS.
“The National Living Wage will increase to £8.91 per hour for those aged 23 and over, which represents an average pay increase of £345 per annum – at a time when businesses are severely struggling with managing costs, some will be concerned that an enforced pay increase is imminent.
“Thankfully, there was no mention of changes to taxes – businesses will breathe a huge sigh of relief that there was not even a suggestion from the Chancellor that tax increases are imminent after recent heightened speculation, but it’s inevitable increases will happen at some point next year.”
Rain Newton-Smith, CBI Chief Economist, comments: “Stark forecasts point to tough times ahead. But through his statement, the Chancellor has made some bold autumn decisions to power a Spring recovery.
“The Spending Review lays the foundations for a brighter economic future. A new National Infrastructure Bank, long-term funding for innovation, and a comprehensive plan for creating jobs and renewing skills are just some of the building blocks needed to deliver on this vision. It’s right to take this opportunity to plan for tomorrow.
On levelling up, Rain says: “Local authorities and businesses have been waiting a long time to hear how EU structural funding will be replaced from 1 January. They will be encouraged to see pilot programmes launched for the UK Shared Prosperity Fund alongside the Levelling Up Fund. Both will help deliver improvements in communities across the country.”
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, comments: “The FTSE 100 dropped further from recent highs after the Chancellor Rishi Sunak was speaking as the scale of the problem was laid bare amid worries about the outcome of the fraught Brexit negotiations. The mountain of debt the UK has built up to prevent more jobs being washed away is towering but it’s not going to be chipped away at any time soon.
“Unpalatable decisions like personal tax rises have been pushed into the future, not just because voters will have little appetite for them, but because the Chancellor doesn’t think the economy will have the strength to digest them right now.
“The Chancellor has recognised that imposing more tax rises now which would eat into disposable income, at a time when the economy needs discretionary spending and investment to help nurse it back to health would not be prudent.”
Stuart Veale, Chair, Venture Capital Trust Association: comments: “While the Chancellor confronts the realities of the economic impact of the pandemic, he needs to put in place the conditions, incentives and regulatory environment that will enable a strong recovery. This will only be possible if we harness the growth potential of our entrepreneurs, startups and scaleups.
“I am looking for an ambitious plan to encourage the companies we know can create jobs, attract investment and stimulate economic growth – startups and scaleups – to bounce back from the pandemic and create an entrepreneur-led recovery.”