Spring Budget 2023: what it means for business

Alongside the Spring Budget, the OBR released its economic and fiscal outlook.

The OBR brightened its forecast of the UK’s fiscal position with a shallower economic downturn this year, an uplift to medium term growth and an overall improvement to public sector finances. 

The forecast of UK GDP growth was revised upwards since November with an overall contraction of just 0.4% in Q1 of 2023. The UK will avoid a recession this year and begin growing earlier than previously estimated, reaching its pre-pandemic peak by mid-2024. This upwards revision is partly a result of the growth policies announced today, but largely due to an unexpected fall in wholesale gas prices. As a result, businesses should be more optimistic about the year ahead now than five months ago. However, supply-side constraints persist.

After peaking at 11.1% in October of last year, inflation is now forecasted to fall rapidly to 2.9% by the end of 2023. The forecast expects close to 0% inflation in 2025-26, before finally returning to its 2% target in 2028. 

Public sector net borrowing is expected to reach £152bn (6.1% of GPD) and £132bn (5.1% of GDP) in 2022-23 and 2023-24 respectively. By 2027, the year-on-year reduction is expected to reach a borrowing rate of £49bn – just 1.7% of GDP.

However, despite the significant fiscal stimuli, the OBR still forecasts that the overall tax burden will reach a post-war high by 2027-28, including the highest ratio of corporation tax receipts to GDP since the tax was first introduced. 

Headline public sector net debt is expected to finish the year at 100.6% of GDP – 1.2% of GDP lower than the November forecast. The measure peaks in 2023-24 at 103.1% before steadily falling to 96.9% by 2027-28. Again, this is a result of the more positive outlook of growth coupled with an uprating of expected tax receipts and a reduction in spending associated with energy bills. 

Despite improvements to the economic picture, the Chancellor only meets his fiscal targets by the narrowest of margins. At just £6.5bn in 2027-28, the Chancellor’s fiscal headroom is now the narrowest it has been since the financial crisis. This compares to £37bn in George Osborne’s 2010 Budget. The evolution of fiscal space will feed into future policy decisions, notably – for businesses – on whether temporary full expensing can be made permanent.

Budget Day saw significant market volatility, though the fiscal announcements themselves were not the cause of the instability this time around. Focus was squarely on the international banking sector, as shares in the Swiss bank Credit Suisse plunged, following “material weaknesses” outlined in its 2022 annual report and an announcement that its biggest shareholder would not provide any further funding to support the bank.

This caused UK and global equity markets to fall and the pound to shed some of its recent gains against the dollar. It also pushed down gilt yields, reflecting 'safe haven' flows away from riskier assets.

Because of investor focus on the banking sector following the Silicon Valley Bank (SVB) collapse last Friday, it is hard to explain to what extent, if any, today’s Budget impacted financial market movements.

The pound shed some of its recent gains against the dollar, and appreciated against the euro:

Sterling lost 0.7% of its value against the dollar between midnight and 3pm, falling from $1.22 to $1.21. Meanwhile, the pound appreciated 1% against the euro, standing at €1.14 at 3pm on Wednesday 15 March, up from €1.13 at 12am that same day.

Gilt yields fell slightly:

The 2-year gilt yield stood at 3.3% at 3pm on Wednesday 15 March, down from 3.4% at the open. The yields on long-dated 10-year and 30-year gilts also fell – to 3.3% (from 3.5%) and 3.7% (from 3.8%), respectively.

UK equity indices declined, driven by fears surrounding Credit Suisse:

UK equity markets extended their losses, with the FTSE 100 losing 3% of its value by 3pm on Wednesday 15 March. The more domestically focused FTSE 250 was also down (2% for the day to 3pm), it recovered some (but not all) of its losses later that day.

Full expensing

The CBI was successful in its call for ‘full expensing’, in the form of a first-year relief which allows businesses to deduct the full amount they spend on certain qualifying plant and machinery investments. This helps businesses save as much as 25p for every £1 spent. Like the super-deduction, it will exclude second-hand and leased assets, and will only be available to businesses that pay corporation tax (i.e. companies, not sole traders or partnerships). The Chancellor also heard the CBI’s call for better allowances for special rate assets, with a 50% allowance in the first year, after which the rate will return to the standard 6% rate. This saves up to 12.5p for every £1 spent, compared to 1.5p without it.

This is a win as it will provide much-needed support for businesses which choose to invest in the UK – going some way to smooth the cliff edge that is coming from April when the Corporation Tax rate rises from 19% to 25% for many businesses, and the super-deduction ends.

It frees up cash for businesses to invest more, and more quickly. It removes – or at least reduces – the barrier to investing as capital will now receive the same tax treatment as most everyday business spending.

Research and Development (R&D) Tax Credits – support for intensive SMEs

Reductions in deduction and credit rates for all SMEs claiming R&D tax credits will take effect from April 2023. The announcement today will offset some of the negative impact of this cut for those businesses which are ‘R&D intensive’ by offering a higher credit rate. But, this requires that the business spends at least 40% of its total budget on qualifying R&D spend. This is potentially a very high barrier to entry. It also only applies if the company is loss-making.

If your business currently claims SME R&D tax credits, you will need to consider whether your business is R&D intensive, and therefore what rate will apply to your claims from April 2023.

The Budget lacked a comprehensive approach to supporting green investment through the tax system. The Chancellor intends to respond to the US Inflation Reduction Act – which includes a broad package of tax credits to support businesses and individuals to meet green targets – in the Autumn statement, but there is no detail yet on what this response might contain.

The changes to capital allowances are temporary and will apply to spending between April 2023 and the end of March 2026. For businesses with longer investment cycles, this may not be enough time to significantly affect investment decisions. The Chancellor noted that he intends to provide a more permanent solution and the CBI looks forward to working with him and other political stakeholders to ensure permanent full expensing is introduced at a future fiscal event, and forms part of manifestos for the 2024 General Election. We also look forward to working with government on how they can extend the scope to leased assets in a way that guards against abuse.

The government has confirmed that it will publish the spring finance bill 2023 on 23 March and a further series of tax administration and maintenance announcements later this spring. The CBI will work with members to respond to draft legislation through formal and informal consultations on the measures announced at the Budget.

For further reading, find out why the full expensing ask was a priority for us, and why it makes economic sense.

Childcare

For the last 9 months, the CBI has been lobbying government to reduce spiralling childcare costs which prevent parents from accessing employment and stop working parents – who want to work more – from increasing their hours.

The CBI called on government to create a system of provision that is affordable, accessible and high-quality by: increasing funding into the existing system; extending existing provision to 1- and 2-year-olds; and changing the Universal Credit System so that childcare support is paid up front, rather than in arrears.

In the budget the government confirmed that it would increase funding for existing childcare provision. It announced that working parents in England will be able to access 30 hours of free childcare per week, for 38 weeks of the year from when their child is 9-months-old to when they start school. The new offer will be rolled out in stages from April 2024 to September 2025.

The government also announced that support for childcare costs in Universal Credit will be made available upfront and the maximum potential benefit for parents will be increased, although there is not currently a clear timeframe as to when this will happen. The announcements on childcare show that the Chancellor is serious about supporting parents to participate in the labour market. Funding that matches the real cost of delivery is essential to a sustainable early years sector, so increases here are welcome too.

Immigration

The government accepted the Migration Advisory Committee’s (MAC) recommendations to add five construction occupations to the Shortage Occupation List (SOL) in this budget, which will take effect before the summer recess. This will make it easier for employers to hire construction workers from abroad. The CBI lobbied extensively, publicly and privately, for the government to kickstart its review of the SOL and for the remit to extend to roles in Levels 1 and 2 – both wins were confirmed ahead of the budget.

The government will also expand short-term mobility provisions to allow business visitors to do more on their 6-month visitor visas, and will consider enhanced provisions as part of trade negotiations.

Skills

The government announced an expansion to Skills Bootcamps and the introduction of ‘Returnerships’. Returnerships bring together the government’s existing skills programmes and are targeted at (but not limited to) out-of-work people over 50. The offer is supported by £63 million for an additional 8,000 Skills Bootcamp places in 2024-25 in England, and 40,000 new sector-based work academy programme placements across 2023-24 and 2024-25 in England and Scotland.

The new offer may give firms some much needed flexibility to attract and train experienced workers. However, it is unclear how an expanded skills offer will address the underlying causes of inactivity and encourage over-50s to return to employment.

The government also signalled the ongoing review of the skills system by Sir Michael Barber and plans to introduce a Lifelong Loan Entitlement from 2025. The CBI will represent the views of our members to government as these policies continue to develop.

Pensions

The government abolished the Lifetime Allowance (LTA) above which withdrawals are taxed at 25% - or at 55% when taken as a lump sum. The Annual Allowance (AA) was also raised from £40,000 to £60,000 and the Money Purchase Annual Allowance (MPAA) from £4,000 to £10,000. The CBI welcomes any measure which may keep highly skilled older workers in the workforce and ease the skill shortages faced by businesses.

Childcare

Given the worker shortages that providers are already facing, it will be a big challenge for the sector to grow fast enough to meet the demand created by the new offer. The phased approach to implementation is an important start and will need to be complemented promptly by a workforce strategy to address current labour and skills shortages in the sector.

Immigration

Further additions to the SOL beyond the construction sector are needed.

Skills

There were few announcements on education and skills policy, and little to address wider skills shortages in the long term. The government did not make any announcements on reform to the Apprenticeship Levy. The CBI has continuously made the case that Apprenticeship Levy regulation is too rigid, resulting in inefficient or unused funding, and that reform of the Levy into a more flexible Skills Challenge Fund would help firms to invest in their long-term skills needs.

Childcare

The CBI will continue to work with childcare providers and employers to ensure that the implementation of the government’s plans support affordable, accessible and high-quality childcare provision that supports parents to work the hours they want to.

For further reading find out more on why childcare is a business issue and the five ways the UK’s broken childcare system has been preventing economic growth.

Immigration

The consultation for a major review of the Shortage Occupation List is live and open until 26 May 2023. The CBI are committed to ensuring our members are well equipped to be able to submit quality and comprehensive evidence to the MAC outlining where they have shortages and why immigration will help plug some of those gaps. If you want to get involved, please reach out to your account manager or email Yusuf, Policy Advisor for Immigration.

Skills

The CBI will gather further details about the Returnerships programme and will continue to make the case for increased flexibility across the skills landscape, notably for apprenticeships.

Pensions

The change forms part of a larger package to address inactivity – including a lack of affordable childcare – which is a strong step in the right direction. We look forward to working with the Chancellor to address long-term health issues and improve support for retraining and upskilling.

For further reading, find out more about our calls to make the Apprenticeship Levy more flexible.

Support for household energy bills

With rising energy bills continuing to impact the cost of living, the extension of the energy price guarantee (EPG) until the end of June will come as a welcome relief to households. So will the announcement of pre-payment customer charges being brought in line with comparable direct debit customers until the end of the EPG. This was having a disproportionate impact on vulnerable and low-income households.

Government funding for Carbon, Capture, Usage and Storage (CCUS)

Government recognition that investing in green industries will not only be vital for delivering on energy security and net zero but also economic growth was hugely welcomed. In our budget submission, the CBI highlighted that CCUS is not only vital for enabling low carbon technologies like electrification and hydrogen, but for delivering against out targets for a fully decarbonised electricity system. Today’s announcement of £20bn in additional funding is a significant step towards demonstrating growth potential in technologies where the UK has a distinctive strength.

Launch of Great British Nuclear (GBN), with focused support for small modular reactors (SMRs)

Today marked a notable moment for recognising nuclear as part of delivering energy security and resilience. The launch of GBN and the inclusion of nuclear within the green taxonomy, subject to consultation, will provide strong signals to the investor and business community, enabling critical investment into new projects. Meanwhile the support for SMRs presents another opportunity for the UK to grow key green industries. By developing this technology domestically, it also has the potential to contribute tens of billions of export value this decade. 

There was little mention of energy efficiency for homes or businesses, and no details of next steps on the Industrial Energy Transformation Fund (IETF). There was also very little on transport decarbonisation, including developing a market for sustainable aviation fuels, and reforms needed to support charging infrastructure rollout.

Meanwhile, there was no announcement on establishing an investment allowance under the Energy Generator Levy. The CBI and others in the industry have called for a similar enhanced relief to be available to the oil and gas sector to encourage investment in renewables.

Many looked to this budget to provide the UK’s green industrial policy response to the packages seen from the US Inflation Reduction Act and EU Net Zero Industry Act. With a 'green moment' expected at the end of March, businesses will watch to see how the government fulfils its commitment to deliver on net zero, and make the UK an attractive destination to invest in decarbonisation technologies. In the coming months the CBI will: 

1. Respond to upcoming government consultations, including on: nuclear in the green taxonomy; the extension of the Climate Change Agreement (CCA) scheme; proposals for future CCAs; and the importance of economic regulators in growth and innovation.
2. Ensure the right enabling conditions to unlock investment in low carbon infrastructure, including on planning, skills, and regulation.
3. Identify where the UK has competitive advantages in green technologies that will drive economic growth and the mix of incentives, regulations and policies needed to accelerate these opportunities.

For further reading, find out why we thought energy efficiency was a Budget no-brainer and a round-up of the green growth measures we think will have the biggest impact.

An extension of the British Patient Capital (BPC) programme for 10 years, pledging £3bn over that period

BPC has been an effective provider of funding for fast-growing businesses. This long-term extension of the programme, which was launched in 2018, is welcome as it assures government funding across industries including life sciences and clean technologies.

Confirmation of a public consultation on the UK Green Taxonomy

Businesses have waited for this confirmation for a few years. The Taxonomy is supposed to provide a 'dictionary' for sustainable economic activities and was presented by the government as a key part of the UK’s green finance regulatory regime. Having clarity on its future and design will be much needed to allow businesses to plan ahead for the green transition.

Commitment to two VAT reviews in the sector

The first of these reviews aims to improve the legal clarity and certainty of VAT rules. Government is continuing to discuss the proposals with interested stakeholders and will publish the response to the consultation in the coming months.

The second review is around simplifying the VAT treatment of financial services more broadly. Government will be building on the recommendations of the Industry Working Group established to consider the future of VAT and financial services, and will continue working with industry stakeholders to reduce inconsistencies. This is welcomed by the financial services industry as decreasing a regulatory and cost burden, and will also allow for lower costs for businesses seeking financial products and services.

A pledge to unlock defined contribution (DC) pension fund investment into the UK’s innovative firms

The government has already taken important steps to address barriers and to accelerate progress. It will work closely with industry and regulators to bring forward an ambitious package of measures by the autumn. The government also pledged to drive the creation of new vehicles for investment into science and tech companies, tailored to the needs of UK DC pension schemes through a new Long-term Investment for Technology & Science (LIFTS) initiative. At Spring Budget, the government invited feedback on the design of the competition. These pledges, if realised, will enable innovative businesses to access greater pools of the patient growth capital that’s currently under-utilised in the UK economy.

We were expecting further clarity on public markets reform in this budget, but the Chancellor confirmed this will come in the Autumn Statement.

The CBI will consider how best to lend its support to the VAT reviews to ensure there is a positive impact of access to finance, and global competitiveness of the sector.

The CBI will contribute feedback on the design of the LIFTS competition.

Support for employers and employees on health interventions for prevalent conditions

Within a £400m package of funding to be deployed in partnership with the Department for Health & Social Care (DHSC) and Department for Work & Pensions (DwP), government has made a commitment to scale up impact on the existing Individual Placement and Support Scheme for mental health, expand support through Musculoskeletal (MSK) Hubs, and deliver a WorkWell pilot with JobCentres.

Widening access to occupational health services across the economy

Through a commitment to consult publicly, government has recommitted to an SME-focused subsidy, first outlined in Health is Everyone’s Business. It has also shown willingness to look at tax levers for incentivising greater national uptake rates for occupational health services. To ensure this, it will consult on the ability of the occupational health market, absorbing increased uptake and regulatory levers.

Supporting returners back into the workforce and modernising diagnostics

The government has committed to an enhancement of the ‘Mid-Life MOT’ policy and outlined funding to digitise the existing NHS Check for individuals between 40-75 to prevent more cases of cardiovascular disease through faster diagnosis and processing.

Intervening in the pension system to retain clinical staff in the NHS

Over the medium term, this has the potential to positively impact the volume of clinical research and trial skillsets available in the UK system, facilitating treatment and medicine development.

The UK investment environment for life sciences remains a concern. Recent changes in the UK’s investment environment for health and life sciences, combined with economic uncertainty, make it difficult for companies in this sector to sustain and grow their activity in the UK. The government should consider international benchmarking when making decisions about pricing schemes for medicines.

There is a risk that the UK will fall behind its competitors in its commitment to become a ‘science superpower’. Added to this, a thriving health and life sciences sector backed by a supportive ecosystem carries potential to address the biggest national and international health and productivity challenges, whilst also contributing to economic growth.

1. The upcoming consultations on occupational health should consider workforce health offers beyond the scope of mental health and muscular skeleton treatment. Considering workplace health in this all-encompassing way will enable employers to become a frontier for preventative health and take pressure off healthcare services.
2. The deployment of work and health initiatives, as well as those aimed at community-based treatment, should be delivered in partnership with local employers or representative groups. The intentions laid out in the Red Book are positive and as such the CBI team will continue to work with DHSC, DwP and industry to help government make progress on prevalent conditions and reduce the volume of ill health among the working age population.

For further reading, find out why supporting workplace health will boost productivity and help the NHS.

It was great that innovation (‘the UK as a science technology superpower’) ran as a theme throughout the Budget

The CBI called for this in its Budget recommendations, to ensure that innovation investments will drive future growth.

Business will welcome a range of specific investments with an innovation focus

We stand ready to ensure a direct role for business in shaping initiatives such as Investment Zones, Quantum, AI and small modular nuclear, as they are implemented, as well as confirmation that these are guaranteed long-term funding.

Publication of the Quantum Strategy and an associated funding package of £2.5bn over 10 years

As highlighted in our Budget submission, it is positive to see long-term funding committed to a technology identified as an area where the UK can be competitive internationally. Long-term certainty on technology priorities, backed up by long-term public investment, is essential to give businesses the confidence to invest alongside government.

Identifying the key challenges in regulation for innovation

Businesses will welcome quick progress on the Vallance Review on tech regulation, with two parts of the Pro-innovation Regulation of Technologies Review – Digital Technologies and Life sciences (interim report) published today. The Budget itself rightly highlighted key, cross-cutting regulatory issues like regulator behaviour, duties and coordination as core pieces of the puzzle for investment and innovation across the UK – and where further urgent work is needed. We look forward to continuing to engage with Patrick Vallance and Angela McLean as this work progresses.

SME R&D tax credits

Additional support for R&D-intensive SMEs through the tax system is welcome. But this package still represents worse value for money for these businesses than the previous SME regime and has an incredibly high threshold of R&D intensity to qualify, while adding administrative hurdles. The government is right to want the UK to be a science superpower – cutting relief for our most innovative businesses at the same time as increasing the corporation tax rate by six points overnight undermines this aim.

Regulator resourcing

It was positive to see government commit an additional £10m to the Medicines and Healthcare products Regulatory Agency (MHRA). However, there was no evidence of increased investment into other regulators to help them implement the Vallance Review recommendations. This would have helped to manage their growing digital tech remits, and to shift them to comply with any welcome changes in innovation and growth duties.

Adoption and diffusion of technology

Following the cut to the Help to Grow digital scheme at the end of last year, there was no mention of how government can support businesses to adopt new technologies, such as by rolling out the Made Smarter scheme nationally. Government must work with businesses to explore how adoption of new technologies, like AI, can be accelerated at scale to drive productivity and growth across the economy.

Detail for some announcements

More detail is needed on how Investment Zones will interact with many other medium-scale existing innovation funds and initiatives from the government, such as Innovation Accelerators and UKRI innovation funding.

The Spring Budget set out some good signals for supporting business innovation investment and certainty for the UK’s scale up environment. But in a context where international competitors are setting out large-scale commitments to key growth sectors, like digital and green technologies, the UK needs to demonstrate greater ambition to compete and win internationally in these sectors. As a start, the government will need to:

1. Continue to prioritise seeking Horizon Europe association without delay. The networks, international partnerships, and opportunities to shape the direction of research provided by Horizon are unique. Plus, association will be core to delivering on the UK’s science superpower ambitions.
2. Prioritise the join-up of digital regulation in next steps of the Vallance Review – as well as the associated resources needed for regulators to deliver these duties and regimes effectively.
3. Give firms the strategic clarity they need to unlock investment. Publish a Semiconductors Strategy and the White Paper on the governance and regulation of AI. And bring forward the Digital Markets, Competition and Consumer Bill.
   
   

Investment Zones

The Government announced it will set up 12 new Investment Zones, including four across Scotland, Wales and Northern Ireland, influenced by our work on Clusters. 

Each will be focused on one of the Government’s key future sectors – green industries, digital technologies, life sciences, creative industries and advanced manufacturing.

Incentives and interventions worth £80 million over five years per zone will be agreed at a local level. These include access to enhanced rates of: Capital Allowance; Structures and Buildings Allowance; and relief from Stamp Duty Land Tax; Business Rates and Employer National Insurance Contributions, and grant support on skills.

According to HMG, “To access this offer, plans must credibly set out how local partners will use the levers available to propel growth in priority sectors, identify private sector match funding, and use the local planning system to support growth. Plans will be developed collaboratively by Mayoral Combined Authorities (MCAs) – working in partnership with local universities, councils and businesses – and central government.”

Local partners within the geographies covered by the following authorities will be invited to begin discussions on hosting an Investment Zone with the Department for Levelling Up, Housing and Communities (DLUHC) and HM Treasury, with a view to agreeing Investment Zone proposals by the end of the year 2023.

• the proposed East Midlands Mayoral Combined County Authority 
• Greater Manchester Mayoral Combined Authority 
• Liverpool City Region Mayoral Combined Authority 
• the proposed North East Mayoral Combined Authority 
• South Yorkshire Mayoral Combined Authority 68 Spring Budget 2023
• Tees Valley Mayoral Combined Authority 
• West Midlands Mayoral Combined Authority 
• West Yorkshire Mayoral Combined Authority

Multi-year single settlement deals for trail blazer devolution plus 100% business rate retention

The CBI has been calling for more and greater devolved powers to elected metro mayors, with trailblazer deals a significant, specific ask in our budget submission.

The government has agreed, subject to ratification, trailblazer devolution deals with the West Midlands Combined Authority and the Greater Manchester Combined Authority. 

Currently, government funding for devolved policy areas must be agreed with the relevant department in Whitehall. This new arrangement will provide a single, cross Whitehall funding settlement allowing MCAs to deliver on a range of economic activities, including local growth and place management, local transport, housing and regeneration, adult skills and retrofitting buildings to drive decarbonisation.

Business rates retention 

The government intends to expand the local retention of business rates to more areas in the next Parliament and will work closely with interested councils to achieve this. The government also remains committed to bringing forward wider proposals to improve the local government finance landscape in the next Parliament, with DLUHC to set out further details “in due course.”

Round 3 of announced £1 billion levelling up fund, plus £400 million in levelling up partnerships and £200 million regeneration funding for towns

The Spring Budget announces the rollout of new Levelling Up Partnerships, providing over £400 million and bringing the collective power of government to provide bespoke place-based regeneration in 20 of England’s areas most in need of levelling up over 2023-24 and 2024-25.

The government will ensure a fair geographic spread across the regions of England, inviting the following areas to develop a partnership: City of Kingston upon Hull, Sandwell, Mansfield, Middlesbrough, Blackburn with Darwen, Hastings, Torbay, Tendring, Stoke-on-Trent, Boston, Redcar and Cleveland, Wakefield, Oldham, Rother, Torridge, Walsall, Doncaster, South Tyneside, Rochdale, and Bassetlaw.

Apportionment of this investment will be made on a case-by-case basis, and in each of these places, the government will work with local leaders and mayors in councils and combined authorities, local businesses from all sectors, community organisations and residents to identify and address the biggest barriers to levelling up.

Full detail is lacking as to how exactly the investment zones will work – particularly with respect to bidding – and the above specified geographies do not cover the West of England, London or Cambridgeshire.

Although there is agreement to look at extending trail blazer devolution powers to all MCAs over time, no timescales have been confirmed to date.

No details on mayoral powers over inward investment, wider skills devolution and other fiscal powers have been provided.

Government, "Is minded to withdraw central government support for Local Enterprise Partnerships (LEPs) from April 2024,” with delivery of functions expected to be transferred to local authorities. LEPs have played an important role in giving regional businesses and communities a channel through which to help shape and influence regional economic strategies. If they are abolished and the functions transferred to local authorities, we would want to see adequate resources are available to ensure economic strategies are developed and aligned to meet the needs of regional businesses.

1. Engaging directly with HMT, and through ongoing work on clusters, on the creation and rollout of Investment Zones
2. Getting further detail on powers over inward investments
3. More clarity as to further £1bn announced for LU funds in the absence of any real detail in the Budget

Investment in local transport improvements

Although relatively small in scale, this investment package included: an extension to the funding available under the City Regional Transport Fund of £8.8bn across 2027/28 to 2031/32; an additional £200m to maintain and improve local roads covering work like potholes and road resurfacing. There was also a small pot of money (£15m) to maximise the economic benefits of the existing investments to East-West Rail.

Action to tackle labour shortages in the Construction Sector

The budget announced that government has accepted the MAC’s interim recommendations to initially add five construction occupations to the Shortage Occupation List which will take effect before summer recess.

More money for defence 

The Budget announced a further £5bn for defence and national security priorities over the next two years, as well as a commitment to get to 2.5% of GDP being spent in the longer term. Whilst positive, industry is clear that we need more details on how and when this additional capital will be deployed.

Clarity on major projects and overall infrastructure investment

The CBI called on government to provide clarity on how it will tackle the inflationary pressures impacting infrastructure delivery, specifically as to which projects will go ahead and when. Other than announcements regarding HS2, industry remains unclear about how even the projects in the National Infrastructure and Construction Pipeline will be taken forward.

There has been no progress on planning

Businesses continue to cite lack of planning progress as a consistent barrier to growth. Government recently concluded a consultation on the National Planning Policy Framework, but it must go further to deliver wholescale reform to a slow and inconsistent system.

Failure to scale up 'Made Smarter'

With labour supply limited, incentives to help firms invest in automation and technology are crucial. This is therefore a missed opportunity to build on the early success of the Made Smarter programme.

The CBI will continue to represent members by:

• Pushing for greater clarity on infrastructure delivery in light of the ongoing issues with material and labour costs
• Publishing a Planning Insights Paper in April this year, laying out the CBI’s vision for a more streamlined, growth-enhancing planning system
• Continuing to lobby for the need to scale up Made Smarter

Businesses will welcome the Chancellor’s announcement that an investment zone will be created in Wales, one of 12 such sites across the UK. If created correctly, this could replicate the success of the South Wales Industrial Cluster, creating thousands of jobs, reskilling, tax incentives and supply chains, and turbocharging economic growth. With £80m of spending per investment zone, this is a chance for the UK and Welsh governments to build a joint plan for growth which creates world leading economic assets around high performing business clusters, to provide new employment opportunities, and help attract new investment to Wales.

Boosting childcare provision in England is a big win for businesses struggling to recruit and retain, and for parents’ balancing care and career needs. We want the Welsh government to follow the UK government’s lead on extending their childcare offering. The Welsh government has led in this area for many years and we are keen to work with them to ensure we continue to provide the childcare support parents in Wales need.

More information on the long-awaited semiconductor strategy

The strategy would have helped the sector keep up with growing international competition. Business is keen to see a strategy published soon.

More information on the medium- to long-term support for Energy Intensive Industries

More information was needed if Welsh EIIs are to remain on course to meet their net zero goals.

We will continue to work with the Secretary of State for Wales and the Welsh Government to fully capitalise on the Budget’s positive announcements, and continue our dialogue on areas like semiconductors and EIIs.