November 12, 2021

Budget 2021: the business perspective

The autumn budget announcement at the end of October was an opportunity for employers everywhere to gauge the Government's assessment of how the economy is coping, what the forecasts are, and how to safeguard against any further turbulence that may be coming down the track in these troublesome times.

The tone that the Chancellor struck in his budget statement gave the impression that the times weren't troublesome at all. The decision to strike this optimistic chord was clearly a deliberate and political one, following the script set at the Conservative Party conference (amongst the noises of agreement from the Tory backbenches, one could almost make out the ghost of Harold MacMillan telling the house they'd never had it so good).

Despite this jarring with possibly the least optimistic 20 months in living memory, the tone was backed up by genuine signs of positivity put forward by the Office of Budget Responsibility (OBR). Growth is up, with the economy expected to expand by 6% over the coming year. Unemployment is at 5.2%, in comparison with the 12% figure that was predicted at the height of the pandemic. The expected spike in redundancies that many of us had quietly predicted would accompany the end of the furlough scheme has failed to materialise, and the economy is expected to return to pre-Covid levels by the end of 2021.

This has prompted the Treasury to remove the public sector pay freeze and increase minimum wage from £8.91 to £9.50; an increase of 6.6% that would comfortably (or hopefully) incorporate the expected rise in inflation. This is, of course, all predicated on the assumption/hope that we are fully out of the Covid woods with the Chancellor continually referring to the pandemic in the past tense ("whatever it took" and "we dealt with …" as opposed to "whatever it takes" and "we are dealing with…").

How realistic is this this optimism?

The more cautious and less positive signals that are all around us did have to be acknowledged. Inflation is currently forecast to reach 4%, the highest since the financial crash. The energy price crisis and the difficulties in supply and demand were all touched upon with the message that these were global issues that would take months to ease.

The temporary visas for HGV drivers were raised as the current headline solution. This has added to the speculation that further exemptions to the business immigration system may be brought in to incorporate other sectors that the skilled worker route does not accommodate, the agricultural sector and the care sector being amongst the most notable. This is so far, however, nothing more than speculation.

The declared financial support for life sciences and SMEs is in part designed to maintain the workforce in both sectors, as are the concessions on business rates to the hospitality and retail sectors, amongst the worst Covid-hit areas of the economy.

Mr Sunak is keen to imply that the emergency measures that were a fully integrated part of the workforce throughout 2020-21 will not need to be repeated in the near future as the circumstances have completely changed. Whether this is a correct assessment remains to be seen.

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