The Chancellor of the Exchequer, Jeremy Hunt, delivered the Spring Budget today, and once again, there was something for everyone to like or dislike.
The budget is being described as a “Budget for long-term growth,” highlighting the expectation that inflation will move lower. Hunt said the country needs to build a high-wage, high-innovation economy. “The policies I announce today will mean more jobs and more growth,” said Hunt. The Chancellor predicted that the UK economy would continue to grow faster than the three largest economies in the European Union.
The Chancellor announced various changes in the tax code, including many cuts. One high-profile change was the non-Dom exclusion, which allowed UK citizens living elsewhere to not pay taxes except on income derived in the UK. The government is now taking a page out of the USA’s approach and will start taxing UK citizens everywhere.
The Spring Budget claims to bring new money to “fast-growing industries” by providing tax relief for various sectors of the economy.
The Chancellor said the UK is on track to become the world’s next Silicon Valley, adding that it easily tops both Germany and France for the size of its tech economy.
Some financial items of note: The government plans to introduce a new British ISA, in addition to existing amounts, allowing up to £5000 to be invested in UK businesses.
The government will also legislate the reinstatement of the previous eligibility criteria to qualify as a high net-worth or sophisticated investor. The government will carry out further work to review the scope of the exemptions, expecting to return the thresholds to the previous lower amounts.
As part of the policy changes, the UK government is consulting on the Private Intermittent Securities and Capital Exchange System (PISCES), a new market that aims to allow private companies to scale while boosting the pipeline of future IPOs in the UK.
The UK government is launching a consultation to seek views on how best to implement the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard. Previously revealed in November 2023, the changes are expected to be made in time to ensure that information exchanges take place from 2027.
CI received multiple comments from Fintech Insiders in the UK. Feedback was mixed, with some claiming a missed opportunity to help the UK economy while others focused on more positive policies.
Jack Fletcher, Head of Policy & Government Relations at enterprise DLT and firm R3, said while the comments on boosting economic growth were encouraging, he would have preferred to hear more about boosting financial innovation for the UK financial sector.
“The introduction of specific regulatory measures to guide the development of innovative tools, like distributed ledger technology [DLT], will help to distinguish the UK as a leader in initiatives such as accelerated settlement and central bank digital currencies. The UK has made good progress with its plans for a digital pound, but choosing the right technology will be the key to its success. The government must prioritise privacy and smart regulation to realise the potential of a digital pound.”
Fletcher said that it is simple for London to maintain its status as the top global hub for Fintech, but technology, like DLT, must be at the heart of the strategy.
The CEO of Mosaic Smart Data, Matthew Hodgson, welcomed the UK government’s plan to support the tech sector.
“It’s great to see the government committing to the future of technology and innovation, this continued support is critical if the UK is to bolster its reputation as a hub for innovation in fintech and continue to be a leader in AI development and implementation.”
Laurent Descout, co-founder and CEO of Neo, described the Spring Budget as lacking support for UK SMEs.
“It is disappointing the Chancellor has not listened to the calls of SMEs for further support by bringing capital expenditure within the scope of the R&D scheme, which is already taking place in France and Ireland. Businesses are struggling to deal with soaring interest rates, late payments and difficulties accessing necessary funding. This decision heightens the uncertainty for the growth of tech start-ups and the UK’s position as a leading fintech and innovation hub.”
Claiming there was a shortcoming in the number of announcements pertaining to the UK property market, Paresh Raja, CEO of Market Financial Solutions (MFS), said the attempts to woo voters before the election, that the Chancellor “missed a trick” by not bringing forward more meaningful policies for the property market.
“Cutting property CGT rates will be welcomed in some quarters. But elsewhere, after years of tightening regulation in the buy-to-let market, the Government has indeed now moved to put the squeeze on holiday lets. Ensuring there are ample properties available for local homebuyers in tourist hotspots makes sense, but it is regrettable that the solution is always to target investors and penalise landlords rather than boosting supply through greater investment into housebuilding.”
Raja said that changing the non-Dom rules risks harming the London prime property market.
“Time will tell how plans for a shorter-term non-dom-style tax status might take shape, but given Labour was already pushing to scap non-dom status, we should not expect much relaxation in this reform,” said Raja. He added that it was telling that the Chancellor praised the government for the construction of 1 million new homes even while this number falls far short of what is needed.
“Ultimately, after two years of rising interest rates, today’s Budget would have been an opportune moment to bring about a string of policies and reforms to boost the property market. It feels like a missed opportunity.”
Douglas Grant, Group CEO of Manx Financial Group, stated:
“Today’s decision to provide £200M of funding to extend the recovery loan scheme, enabling 11,000 small and medium-sized enterprises (SMEs) access to the finance they need, brings hope and encouragement to both businesses and consumers. SMEs should take this opportunity to reevaluate their current lending arrangements and strengthen their positions.”
Grant said that in-house research reveals a shift in the financial landscape for SMEs as now two out of five SMEs are unable to secure financing.
“This financial constraint, coupled with a potentially unprecedented and volatile environment marked by ongoing conflicts, multiple elections, a tightening labour market, and persistent cost-of-living challenges, poses obstacles to the prospects of SMEs and national economic growth. Moreover, given the projection of stubbornly high interest rates for the next 12 months and increasing demand for working capital, we encourage SMEs to reassess their current lending situations. It is crucial for them to be well-prepared but mindful of potentially reducing debt payments this year.”
Grant said that a permanent plan for government-backed loans could play a pivotal role in “unlocking economic recovery” for many businesses.
The Head of Development Finance at LendInvest, Steve Larkin, believes it is encouraging that the government is providing substantial funds to Canary Wharf and Barking.
“That said, it’s imperative that SMEs are not overshadowed by major national house builders here. SMEs play a crucial role in supporting the UK’s housing supply issue, driving local employment and contributing to community development in Sheffield, Blackpool and Liverpool too. Their involvement would ensure a more comprehensive urban evolution, reflecting the true spirit of ‘levelling up’. Let’s ensure that the path of progress allows room for all, fostering an environment where innovation, community, and growth go hand in hand.”
Rich Arundel, Chief Evangelist for Currencycloud and Visa Cross-Border Solutions, shared this comment on the Spring Budget.
“Unlocking investment for the best and brightest in UK technology can only be seen as a good thing. Making it easier for capital to flow into these businesses will have the triple benefit of helping home-grown success stories to thrive, making the UK a more attractive place to build and list innovative, high-growth firms, whilst also delivering better long-term returns for the UK’s savers. As a country, we have a rich history of innovation and entrepreneurship but the devil will be in the detail, and it is now a question of how the Chancellor plans to encourage this increased investment from pension funds.”
The budget document is available below.