The Spring Statement - what does it mean for businesses?

As a Spring Statement rather than a Budget, there weren't too many big surprises for businesses in chancellor Rachel Reeves' speech this week.

With Reeves restricted by her own fiscal rules, there were the expected spending cuts to the Welfare Budget, though with an increase for defence. 

And for businesses, there were no more tax increases – although, as previously announced, employers' National Insurance contribution is set to increase by 1.2 per cent to 15 per cent from next month.  

"For businesses, hopes of U-turns on previously-announced policies such as National Insurance hikes did not materialise, meaning no relief for the escalating costs that are creating headaches for many of the UK's 5.5 million SMEs," says Hamish Martin, partner at merger advisory firm LAVA Advisory Partners.

"More broadly, the challenging economic landscape for SMEs – higher inflation, wages, and borrowing costs – points towards a potential spike in M&A activity. The extremely modest forecasts for the UK economy could make life challenging for small companies, in turn opening the door to more consolidation across various industries."

One tax announcement to affect businesses – though hopefully not too many – was the new focus on tax evasion, with the Government set to spend an extra £80 million on debt collectors. 600 staff will also be recruited into HMRC’s debt management teams.

"When working people are paying their taxes, while still struggling with the cost-of-living, it cannot be right that others are still evading what they rightly owe in tax," said Reeves.   

Meanwhile, more small businesses are set to take part in Making Tax Digital for income tax self-assessment, with sole traders and landlords with income over £20,000 joining the system from April 2028. 

And there'll be bigger late payment penalties for VAT and Making Tax Digital, which go up from two per cent to three per cent after 15 days, two per cent to three per cent after 30 days, and four per cent to 10 per cent from day 31. This will take effect from next month.
 

Infrastructure investment

There's good news for businesses in – or wanting to relocate to – the Oxford Cambridge Growth Corridor, with the project highlighted as part of the announcement of a further £13 billion of capital investment over this parliament. You can read more in one of our recent articles: Will the Oxford-Cambridge growth corridor benefit the UK's tech startups?

And, as part of a major house-building push, there's to be a £625 million package to boost skills in the construction sector, creating up to 60,000 more skilled construction workers.

There was also an extra £4.5 billion over five years announced to support strategic manufacturing sectors, including £2 billion for the automotive industry and nearly £1 billion for aerospace. 

Consultations to come

The announcement also included a pledge to examine how the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), Venture Capital Trust (VCT) scheme, and Enterprise Management Incentives (EMIs) support entrepreneurs and venture capital firms.

And, says Eamonn Ives, research director at the Entrepreneurs Network, "Though they have proven successful to date, aspects of some now require inspection – not least around limits and thresholds for qualifying companies which have stayed static since their inception. With minor tweaks, we can ensure they continue to deliver for our precious entrepreneurial ecosystem, and by extension, the whole of the British economy."

There's also to be a consultation on R&D tax relief. Disappointingly for businesses, there was no phasing in of the end to Business Rates Relief of 70 per cent for pubs, restaurants, bars, and cafes. This came in in response to the Covid-19 pandemic, but is set to be reduced to 40 per cent in April as planned. 

Similarly, there was no phasing in of higher employers' National Insurance contributions, set to increase from 13.8 per cent to 15 per cent, with the threshold at which employees’ wages are eligible for the tax due to fall from £9,500 to £5,000 per year.

"While we welcome the Chancellor's focus on economic growth, we are deeply concerned that the Spring Statement has overlooked the immediate crisis facing independent retailers," says Andrew Goodacre, CEO of the British Independent Retailers Association (BIRA). 

"Our members are confronting a perfect storm of rising costs – from the 140 per cent increase in business rates to the National Living Wage rise and National Insurance changes – all while consumer spending remains subdued."

Wait for the big one

But while the Spring Statement may bring little change for most businesses, they shouldn't relax too much over the months until the 'one big fiscal event' per year that Reeves has promised to stick to – the Autumn Statement. 

With growth for 2025 now set to be just  one per cent, she's likely to face a stark choice between further spending cuts and tax rises. 

"Tax rises were never on the horizon for this statement, however much the Conservatives tried to label it an 'Emergency Budget'," says Hamish Martin. "Will that still be the case by the real budget in autumn? That is a very different matter."

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