The Chancellor of the Exchequer Rishi Sunak has delivered his Budget for 2021, announcing a raft of changes to ensure businesses pay their way in supporting the UK’s economic recovery.
“An important moment is upon us. A moment of challenge and of change, of difficulties, yes, but of possibilities too. This is a budget that meets that moment,” Sunak told the House of Commons on 3 March.
Here are the five most important announcements for the City, and what experts make of them:
Fast-track, global mobility visa schemes
The Chancellor said a “fast-track” visa scheme will be announced to help high-growth technology companies attract the best foreign talent. Endorsement from a third party will no longer be required, making it quicker and more simple to immigrate to the UK.
The updated visa scheme was recommended by the Treasury-commissioned Kalifa Review last month, which suggested the UK was falling behind similar programmes in other countries such as France and Canada. Within the “elite” points-based visa will be a “scaleup” stream for those with job offers from recognised UK high-growth companies to qualify for fast-tracking.
Meanwhile, a new Global Business Mobility visa will be launched by spring 2022 for overseas businesses to establish a presence in the UK, or to bring over staff from abroad. A delivery roadmap for all the new visa schemes will be published in the summer.
“A tailored visa route into UK scale-ups will have far-reaching positive implications and will support the tech sector as it looks out to the global marketplace,” said Seema Farazi, UK and financial services immigration lead at EY.
“It is crucial the UK leads the way in attracting skills from all over the world as well as creating homegrown talent. Today’s announcement will drive progress in establishing the UK as a leading scale-up market.”
Katie Newbury, Immigration Partner at Kingsley Napley said the new visa categories need to provide potential applicants “with a clear, straightforward route to the UK, without the uncertainty and often unattainably high bar” set by the current global talent visa which, whilst excellent, is limited in scope.
“The Chancellor made clear today that reinvigorating the UK economy requires us to be at the forefront of scientific and technological advancements and we know that businesses need access to top talent in order stay ahead.
“We are mindful the government previously announced a plan to introduce an unsponsored highly-skilled visa route, so this is not in and of itself a new idea, but we hope the detail lives up to the promise of ambitious change and that the new arrangements are introduced swiftly. It will be somewhat disappointing if the much-hyped points-based visa is restricted to the sectors mentioned by the Chancellor today but the detail remains to be seen,” said Newbury.
Corporation tax and super deduction
Corporation tax will be hiked up across the UK’s businesses, rising from 19% to 25% by 2023. Small businesses with profits below £50,000 a year will pay the lower rate of 19%, Sunak said, while larger companies will face the higher rate in 2023.
Around 10% of the UK’s companies are expected to pay the full higher rate, but “only on the larger, more profitable companies, and only in two years’ time”, he added.
Stella Amiss, tax policy, regulation and media leader at PwC UK, said the blow of hiking up corporation tax was softened by “sweeteners”, including a small business rate and increased relief for accessing losses.
“Not a surprise, but may mean less ability for businesses to invest in jobs and skills,” she added.
The government will also introduce a new so-called super deduction regime to boost business investment. Under the scheme, businesses can receive tax relief of 130% of the cost of their investment.
Neil Wilson, chief market analyst at Markets.com, said the rise in corporation tax was “still low in G7 terms but a bit tougher than expected. Brussels can rest easy – London is not going to be Singapore à côté de la Manche.”
“Not many companies will pay this – about 10%, and a super deduction for tax for losses is a punchy move designed to encourage spending by businesses.”
Investment in startups and green economy
The Treasury will launch Future Fund: Breakthrough, a follow-on from the pandemic-era Future Fund which will invest up to £375m of taxpayer money into private but matured startups.
The fund will involve government money being matched by venture capital firms, with a particular focus on high-growth companies and those in life sciences, quantum computing or clean technology. A similar recommendation was made in last month’s Kalifa Review, which suggested a £1bn growth fund for startups to gain access to institutional investment.
A carbon markets working group is also going to be set up by Dame Clara Furse, according to the government. The aim of the group will be to position the UK and the City of London “as the leading global market for high-quality voluntary carbon offsets” which can play an important role in addition to international efforts to reduce carbon emissions. “The working group will draw on the UK’s financial expertise and entrepreneurship and build on the work of crossing-cutting initiatives such as the Taskforce for Scaling Voluntary Carbon Markets,” the government said in its policy documents.
Russ Shaw, founder of Tech London Advocates, said the Chancellor’s announcements for tech companies were “bold steps in the right direction”.
The UK will also sell the world’s first sovereign green savings bond for retail investors, in an effort to help boost the country’s transition towards net zero emissions by 2050. The bonds will fund projects in areas such as renewable energy and clean transportation, while institutional investors will be able to access similar “green gilts”.
The Bank of England will receive a new green and environmental mandate, a new policy remit that reflects the importance of environmental sustainability and transition to net zero.
Shaw added: “If we want a more sustainable, more advanced and more productive economy, we must put in place the infrastructure, capital and skills needed to create world-class verticals in fintech, quantum, life sciences and crucially, green tech — which the government has correctly identified.”
As the government begins to phase out the existing Bounce Back Loan and Coronavirus Business Interruption Loan schemes, Sunak revealed they will be replaced by the Recovery Loan.
Under the new scheme, businesses of any size can apply for loans from £25,000 up to £10m through to the end of the year. The government will underwrite the loans up to 80% for participating lenders.
Donald Boyd, partner at accounting firm Azets, said the new recovery loan scheme aid businesses who have either not borrowed enough cash under the existing CBIL arrangements or where they depleted their cash reserves over the last 12 months.
“The recovery loan scheme is available for any legitimate purpose and coupled with the new 130% investment allowance for plant and machinery expenditure will help businesses invest for the future. One thing the last 12 months has taught us is that the pace of change in technology is relentless and SMEs need to pivot quickly to change business models,” said Boyd.
Lisa Jacobs, Europe managing director at fintech lender Funding Circle, said: “We welcome the government’s recovery loan scheme, which will continue to support SMEs as we emerge from the pandemic. We look forward to facilitating loans under the new scheme, ensuring small businesses have the finance they need to invest, create jobs and drive the economic recovery.”
Bank surcharge review, contactless payments
The Chancellor said the government would review the current 8% surcharge on banks which he said could in combination with other taxes lead to an implied rate of tax that was too high.
“We will review the surcharge to make sure the combined rate of tax on the UK banking sector doesn’t increase significantly from its current level and to make sure this important industry remains internationally competitive,” he told the Commons.
According to Visa, nearly 80% of in-store payments in the UK are now contactless, as these payments remain one of the safest ways to pay, with a fraud rate of just 0.1% in 2020.
Visa’s managing director for the UK & Ireland, Jeni Mundy, rated the payments as “a fast, secure and seamless” payment experience.
“We stand ready to work with our clients and partners to support the Government and the FCA to make this happen as soon as possible, so both consumers and retailers can benefit as the economy opens up,” Mundy said.
Pete Wickes, general manager, Emea, Worldpay, said the demand for contactless payments is also clear but warned the correct infrastructure is necessary.
“It is vital that shops and businesses have sufficient time to implement the changes given the current extraordinary operating conditions. Some consumers will also need time to adjust. Our research reveals that 47% of older consumers are worried contactless payments are not secure, so education will be key,” said Wickes.
Sarah Pennells, head of financial capability at Royal London, noted that the move would make card theft more attractive and could also encourage people to spend more – possibly more than they can afford.
“Some countries are developing innovative ways to deal with contactless fraud, and we should consider what might work well in the UK as well as looking at ways of helping consumers stay in control of their spending,” said Pennells.
Miles Celic, chief executive of TheCityUK, said the lobby body welcomed the review of the surcharge “which has long placed UK headquartered firms at a disadvantage to those in New York and in Asian centres”.
A promise to hike up the limit on contactless payments to £100 was supported by the Financial Conduct Authority, which said the move would “securely improve convenience for consumers and merchants”.
“Increasing the regulatory limits allows industry to raise the contactless limit in the future to meet the evolving expectations of customers and merchants for fast but secure ways to pay,” said Sheldon Mills, the FCA’s executive director of consumers and competition.
To contact the author of this story with feedback or news, email Emily Nicolle