Budget 2021: Our thoughts
It’s safe to say that the 2021 Budget was a mixed bag, offering relief in some areas, but a feeling of disappointment in others.
The announcement showed continued dedication to UK businesses, extending support packages and introducing a number of schemes to help with growth and recovery after the pandemic. While this has given SMEs room to breathe, larger companies now have a corporation tax increase in 2023 to contend with.
Another major focus for the Budget was property. The extension of the stamp duty holiday and the new mortgage guarantee scheme was welcome news for many house buyers and for the property market in general. On the other hand, affordable housing was overlooked, causing concern for the social housing sector.
Green energy also received a mention, looking particularly at technology and R&D activity. However, questions remain over whether this Budget does enough to facilitate the genuinely green recovery that the UK is striving for.
Our experts provide their views on these key topics, exploring the hits and the misses of this landmark Budget.
Taking a regional perspective
A win for the West Midlands
Joanna Deffley, our West Midlands regional head, said:
“Although we heard some eye watering numbers on current UK borrowing, the Budget focused on a package of continued support, with phasing out later in the year. Businesses and individuals in the West Midlands may well be relieved to hear that there will be continued support, but if the chancellor does not intend to put up taxes in the near future, he’s banking on the economy bouncing back rapidly, and businesses growing and investing. That will all depend on the continued success of the vaccine roll-out, and the bounce back being as successful and rapid as the forecasts predict."
“Nevertheless, it’s good to hear the Chancellor talking about levelling up the economy across the country and having a different economic geography. He referred to both Rowley Regis and Wolverhampton in the West Midlands being two of a number of towns that would benefit from a £1 billion investment in 45 new towns deals. These funds can help boost local economies, and it’s great that the Midlands will benefit from some of that investment.”
Driving innovation in the East Midlands
Alex Smith, partner in the Nottingham office and managing director of infrastructure & specialist markets, said:
“It’s fantastic news that the East Midlands bid for Freeport status, based around East Midlands Airport and Gateway Industrial Cluster (EMAGIC), Uniper’s Ratcliffe-on-Soar Power Station site and the East Midlands Intermodal Park (EMIP) has been successful. We look forward to the delivery of such a unique inland Freeport, which will bring significant investment to develop and drive innovation, alternative energy sources and green technologies, as well as significant employment opportunities to the region.”
Thoughts from across our sectors
Continued funding for businesses
“The venture capital industry will need to play its role in funding businesses as we come out of the COVID-19 pandemic, especially as the government inevitably starts to turn the tap off on emergency support."
“The venture capital schemes have been, and will continue to be, an important source of funding for early-stage businesses and SMEs, and so it’s pleasing to see that the chancellor is not proposing any further adverse restrictions on the schemes.”
A boost for property and the economy
“The mortgage guarantee should be good for first-time buyers and obviously will also be welcomed by housebuilders, albeit telling that the focus remains on buying market housing, rather than delivering affordable housing."
“The Freeport proposals and Infrastructure Bank should support the delivery and investment infrastructure, which in turn should drive the delivery of jobs and thus deliver a significant boost to the economies of those regions where the Freeports are to be located.”
More needed for social housing
“The budget provided an opportunity for the government to reinforce the Conservative policy of supporting home ownership through the extension of the Stamp Duty Land tax holiday and the mortgage guarantee scheme. A particular relief for registered providers and buyers that were at risk of not meeting the previous deadline of 31 March."
“The extension of the uplift in Universal Credit of £20 a week was also welcome news for the many thousands of people who need this financial support now more than ever. However, it was a missed opportunity not to make this uplift permanent, given people are still facing exceptionally difficult choices between paying for rent, food or essential utilities."
“Homeownership remained a focus, increasing the potential for the ‘levelling up’ agenda to miss a significant minority in society who cannot afford to buy their own home and for whom it is critical we continue to build and provide good quality social and affordable rented housing. Perhaps one green shoot in this regard is the establishment of the MMC Taskforce, which will hopefully boost housing supply."
“It is great news that the MHCLG is to establish a MMC Taskforce to accelerate the delivery of MMC homes in the UK. Along with some of the other targets already in place, we will hopefully see not only a boost to housing delivery but also the lowering of emissions from the country’s housing stock.”
Falling short of a green recovery
“Certainly, the budget had something for new green tech and R&D, with a highlight being £1bn of funding via the new Net Zero Innovation Portfolio, which will be allocated on a competitive basis for low carbon technology development including long-duration energy storage, floating offshore wind, biomass and regenerative agriculture."
“Another focus was the need to find serious amounts of money to fund the necessary infrastructure for the net-zero transition. We had more detail on the Treasury’s previously announced plans to set up a National Infrastructure Bank, which will benefit from £12bn of government money plus £10bn of government guarantees. This should “de-risk” infrastructure projects and unlock sizeable private sector investment, giving a real stimulus to the construction industry, and replacing some of the funding no longer available from the European Investment Bank post Brexit. What’s not clear right now is how much focus the bank will have on genuinely green projects."
“Further detail was also given on the sovereign green bonds that will be issued from this summer to help finance critical projects to tackle climate change and other environmental challenges and fund key infrastructure investment. In a similar vein, plans were announced for a new NS&I backed green savings bond, again to raise funds for green projects to support the low carbon transition, which will complement other “ethical” savings alternatives in the market."
“However, is this enough to give the UK the green credibility boost that the government has been talking about as we look ahead to the critical COP26 climate talks in November?"
“The transport and heat sectors remain the areas of the economy where more support is needed to get the UK on the net-zero trajectory, yet the ongoing freeze on fuel duty continues. Plus, there was no mention anywhere of energy efficiency or the troubled Green Homes Grant programme."
“With an understandable focus on supporting the economy short term as we come out of lockdown, and with an eye to the public finances medium term, when it comes to net-zero it doesn’t feel like the budget quite delivers.”
"As the chancellor’s plans play out over the coming months and years, only then will we truly see the successes and the failures of what was one of the most important Budgets the UK has ever seen."
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