Brexit blow for Budget?

Last week, the chancellor finally announced that the Budget has been set for later this month, on Monday 29 October.

The delay to this announcement had many believing that the Budget would not be taking place until late November, some even theorising that no announcement would be made until a deal on Brexit had been reached.

In the days that followed, the news has been dominated by wild speculation, for this will be the last Budget before our scheduled exit from the EU in March 2019. There is no doubt that this Autumn Budget will be an extremely important one, as it will likely give the public a more realistic overview of what the future will hold.

Nonetheless, in a report from Monday 10 September, Yael Selfin, KPMG’s chief economist, argued: “Brexit will have a lasting effect on the UK, but economically it isn’t the only game in town. Issues such as improving productivity, reducing regional economic disparity, and ensuring that UK workers have the skills to meet employers’ needs should also be at the forefront of the chancellor’s mind. Bringing productivity growth back to pre-2008 levels alone could see the British economy grow by more than 2%.”

In response to questions posed by Accountancy Age, Melissa Geiger, head of international tax at KPMG said: “There will be a lot of noise about Brexit surrounding the Budget – mainly about how business craves certainty and stability and isn’t getting much of either! With negotiations likely to go right to the wire, it will not be in the chancellor’s power to give us that certainty.”

The uncertainty surrounding the next few months has already influenced businesses. For example, EU M&A value in this country was recently reported to have fallen by 5%; popular opinion is that continuing hesitancy will only increase strain.

Nonetheless, Geiger argued: “I would say [the chancellor’s] best strategy for delivering stability will be to resist making any major policy changes for now. In the Spring he will need maximum room for manoeuvre. Some kind of EU exit deal would minimise the short-term bumps to the economy.

“A no-deal scenario would jolt confidence, but also give him freedom from the EU rulebook to pursue the kind of independent tax agenda that could act as an effective antidote to those jitters. In my view, he needs to wait and see what plays out.”

It is safe to say that the stability of the future economy does hinge – to an extent – on the outcome of the UK’s deal on Brexit. The Budget will provide both the public and the accountancy world with some clarity, but Geiger’s prediction of a softer Budget could mean that many questions will remain, for now, unanswered.

Geiger concluded: “Taking a longer-term view, I want the chancellor to look far beyond Brexit to focus on how best to position the UK as open and attractive for businesses. The UK has a phenomenal skill base, backed by world-leading academic institutions, plus all the other legal, economic, and regulatory conditions that business thrives in.

“The big prize for this country would be to become home to the next generation of global tech companies and embryonic industries that will one day change the world. A new wave of tax relief and other incentives for R&D and innovation would send the right signal on this.”

The future could be very bright for UK businesses, but how soon growth can begin will very much depend on how well the chancellor – and the government – manages to navigate the increasingly murky waters of March 2019.