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Lancashire Times
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8:30 AM 26th November 2020
business
Opinion

Regional Business Reaction To The Spending Review

 
The Chancellor today set out government spending plans and latest economic forecasts.

Speaking in the House of Commons, Mr Sunak said the UK’s GDP is to contract by 11.3% this year, the biggest drop in more than 300 years.

Borrowing is expected to reach £394bn for the current fiscal year, which is the highest recorded level of borrowing in peacetime.

Euan West
Euan West
Euan West, senior partner for KPMG in Yorkshire, “Nothing short of a transformation programme is needed to rebalance the country’s economic geography and this is the yardstick against which policies and investment must be measured.

“A levelling up fund, particularly one that takes a broad place based approach, is to be welcomed, though businesses in Yorkshire will be wondering how this relates to the regional devolution agenda and leadership on the ground, in combined authorities for example, to ensure successful bids contribute to real regional economic transformation.

“More fundamentally, combining the two critical agendas of a low carbon focused infrastructure-led economic recovery from COVID-19 with levelling up certainly has the potential to be a win-win plan. The North is at the forefront of the country’s hydrogen and energy production and decarbonisation innovation so to base the National Infrastructure Bank there is sensible.

“It lacked a shout out but revising the Green Book is actually one of the most exciting proposals as it suggests an understanding of the structural nature of the change needed to really drive transformation in underperforming parts of our economy, for the benefit of all.

BCC Director-General Adam Marshall
"This spending review comes at a critical time as business communities are fighting for survival in the midst of the coronavirus pandemic.

“The launch of the National Infrastructure Strategy is an important step in overcoming the longstanding infrastructure deficit. We’ve spent long enough discussing infrastructure projects - it’s now time to focus on delivery.

“Measures to help people return to work at this challenging time will help limit long-term unemployment but Government must waste no time in putting these plans into action. Government and business will need to work together to re-train and re-skill the UK workforce. Investment in the Kickstart Scheme, in which Chambers are playing a leading role, and the launch of the Restart scheme, will be critical in helping to achieve that.

“With an uncertain winter ahead, the government will need to maintain an open mind on providing further support to businesses struggling to survive. As we look to rebuild and renew local and national economies, businesses will also need further significant incentives for investment in people, productivity and the planet.”

Graham Wright
Graham Wright
Graham Wright, an EY Tax Partner covering Government and Infrastructure

“The government says it is “moving away from a fragmented landscape with multiple funding streams” but the regions will potentially once again find themselves bidding against each other for one pot of money under the chosen structure of the announced £4bn Levelling Up Fund. Managed by three government departments and with projects needing approval from the local MP the approach seems at odds with a broader objective of devolving power and funding decisions.

“The combination of the well trailed creation of a National Infrastructure Bank, as part of the wider £100bn infrastructure strategy, along with changes to the Green Book to prioritise investment in more deprived regions and in sustainable infrastructure, and the Treasury’s new Northern HQ, will create a significant number of jobs and are certainly good news for the North.

“As always the devil is in the detail but it is no surprise that the government has reconfirmed that the role for private finance in future infrastructure investment will not involve PFI models but that it is looking to develop new revenue support models and consider how existing models – such as the Regulated Asset Base model and Contracts for Difference – can be applied in new areas.

“In part, the Infrastructure Bank has been created to replace European Investment Bank participation, but without clarity on the funding gaps it is intended to fill, and how it will work to accelerate investment in UK infrastructure, there is a risk that the National Infrastructure Bank may be seen as a solution looking for a problem.

“However, it is an important indication of the UK Government’s dedication to grow its presence across the UK, bringing policy makers to the heart of communities that will benefit from these ‘once in a generation’ investments.”


Rain Newton-Smith
Rain Newton-Smith
Rain Newton-Smith, CBI Chief Economist

"Stark forecasts point to tough times ahead. But through his statement, the Chancellor has made some bold autumn decisions to power a Spring recovery.

“The Spending Review lays the foundations for a brighter economic future. A new National Infrastructure Bank, a multi-year settlement on R&D, and a comprehensive plan for creating jobs and renewing skills are just some of the building blocks needed to deliver on this vision. It’s right to take this opportunity to plan for tomorrow.

“But ambition must be matched by action on the ground. The Government’s commitment to build, build, build must be delivered now. This means a clear strategy to upgrade the UK’s infrastructure and publishing the Energy White Paper.

“And there can be no let-up in the support for firms facing new COVID restrictions. Firms need help to survive, then thrive. Business investment and confidence can be the engine of UK growth, creating jobs around the UK.”

On infrastructure
“We know just how vital refreshing our ageing infrastructure is to repower the economy, connect more people and create job opportunities across the UK. Putting money into roads, broadband and clean energy will help do just that.

“Most importantly of all, the Government has set out its stall for the long-term by creating a National Infrastructure Bank. With the right remit, the bank has the potential, to crowd in the private finance that will be crucial to delivering these new projects.”

On National Minimum Wage
“Many lower paid workers have been the heroes of the COVID crisis, and business supports government's ambition of ending low pay. But unemployment is rising in lower paying sectors and these increases will be tough for some firms afford, so caution is justified to protect jobs.”

On levelling up
“Local authorities and businesses have been waiting a long time to hear how EU structural funding will be replaced from 1 January. They will be encouraged to see pilot programmes launched for the UK Shared Prosperity Fund alongside the Levelling Up Fund. Both will help deliver improvements in communities across the country.”

A warning from Nigel Green, the chief executive and founder of deVere Group, “The Spending Review was a sobering statement. The figures and projections are simply eyewatering.

“With the UK economy due to experience the sharpest contraction since the Great Frost of 1709, at 11% this year, and with unemployment expected to peak at 7.5% in the second quarter of next year, the government is on course to spend £280bn this year and £55bn in 2021 to tackle the pandemic.”

"Clearly, these are unprecedented times which demand unprecedented sums of money.

“But whilst the Chancellor’s plans to increase spending on important things like infrastructure are welcomed, longer term planning is needed to develop new industries.

“To get ahead of the current dire economic situation, we need investment into industries of the future – and it appears that Sunak missed an important opportunity in this regard in his Spending Review.”

“How we live, do business and interact remains fundamentally changed since the pandemic.

“It is highly unlikely that the world will go back exactly to how it was pre-Covid – there are many aspects of the ‘new normal’ which people like and support, such as working from home and the increasing use of apps for everyday tasks.

“As such, some of the major societal and economic shifts are unlikely to be reversed.”

For these reasons more attention must be paid “to the future economy, not that of the past” says the deVere Group boss.

One area the Chancellor should have highlighted is financial technology, or 'fintech.'

“Fintech is already monumentally reshaping and redefining the way in which all financial services, including banking, across the board are delivered.

“This megatrend is only going to grow in the coming years due to the convenience, freedom and flexibility it offers consumers, coupled with the blistering pace of digitalisation throughout the world.

“Fintech is the future of financial services, which makes up 6% of GDP in the UK. Why did the government not capitalise on this? Especially when Britain is already a global leader in the sector.”

“The Chancellor’s efforts to get through the crisis are noble but more financial commitments must be made sooner rather than later for industries of the future, not only those of the present and of the past.”

Jonathan Geldart
Jonathan Geldart
Jonathan Geldart, Director-General of the Institute of Directors

“Today’s statement provided a sobering view of the challenge ahead, and funding for infrastructure and skills will be crucial to meeting that challenge.

“Just as significant was what the Chancellor didn’t announce. Business leaders will be relieved that the Treasury is resisting the temptation to hike taxes on enterprise for now, but will be concerned that Brexit didn’t merit a mention.”

On the announcement of an infrastructure bank and National Infrastructure Strategy, he said:

“IoD members see infrastructure investment as the top priority for our economic recovery. A long-term plan for upgrading broadband and transport, backed by a new national Infrastructure Bank, will provide a significant boost for business confidence.

“With widespread uncertainty at the moment, clear Government strategy and commitments are crucial encouragement for directors' plans for their own organisations. As ever, the acid test will be how quickly and effectively this funding reaches the ground. Transparency, good governance and a focus on the Net Zero target will be key for both the new Bank and the Levelling Up Fund.”

On the Restart Scheme, Mr Geldart said:

“The Restart Scheme is undoubtedly a welcome measure, but it only addresses one half of the challenge. To counter the rise in unemployment, the Treasury also needs to boost job creation, and it missed a trick by not combining the Scheme with a cut to Employers’ National Insurance Contributions.

“While the economy will receive a boost when vaccines materialise, the Chancellor should be wary of relying on this completely. Directors look to make their hiring plans in advance, so improved prospects might not immediately translate to the jobs market, particularly as many companies will have to deal with a debt hangover before looking to expand."


Andy Wood, Yorkshire Managing Partner at business advisers Grant Thornton “The scale of the economic cost of the COVID-19 pandemic – a staggering £280bn this year alone - meant that the Chancellor would not be able to fully address the levelling up agenda in this Spending Review.

“However, it was pleasing to hear of the plans for a new Infrastructure Bank to be headquartered in the North, alongside the Chancellor’s commitment to create a Northern base for the Treasury. We eagerly await further news on these exciting initiatives, which could have a significant impact on business confidence and investment as our regional economies recover from the pandemic.”

“Addressing the chronic issue of regional economic inequality means engaging in a complicated jigsaw of interconnected investment decisions with place at its heart. Flagship but isolated ventures won’t deliver, despite their undoubted value.”

Steve Harris
Steve Harris

Steve Harris, regional director for Yorkshire and the Humber at Lloyds Bank Commercial Banking,

“The Treasury has put large sums of money behind protecting and creating jobs in a bid to curb unemployment and underpin the economic recovery. This is encouraging news for the region given our latest data shows that many firms expect to reduce their headcounts over the next year.

“Meanwhile, the creation of jobs comes hand-in-hand with the rollout of local and national infrastructure improvements that will be a catalyst in the region’s post-lockdown come-back. The levelling-up agenda is very welcome and firms will be eagle-eyed for action –
in the time they need it most.”


Nigel Morris, employment tax director at MHA MacIntyre Hudson,
said the Chancellor failed to deliver for businesses:

“More help for businesses is essential to protect our economy, yet we saw no major support made available for them, for example a cut in employers’ national insurance payments, or restoration of the £1,000 Job Retention Bonus for keeping on furloughed staff.

“The increase in the National Living Wage is great news for employees, as is its extended age range, which means employees now qualify from age 23, but this puts more pressure on stretched employers to fund wages and associated national insurance costs.

“If the £3bn investment in the Restart Scheme delivers on its aim to help one million people, it will really help soften the blow of job losses resulting from the pandemic. Rishi Sunak’s focus on protecting lives and livelihoods is much welcome, but we need the right balance between support for individuals and the companies that employ them.”

Frances O'Grady
Frances O'Grady
TUC General Secretary Frances O’Grady

“For all the government’s talk of levelling up, this spending review will level down Britain, hitting key workers’ pay and breaking the government's promises to the lowest paid.

“After a decade of standstill pay, yet another pay freeze is a kick in the teeth for the key workers in the public sector who kept the country going in this crisis.

“And workers expecting a national minimum wage increase – not least the two million who are key workers – have been let down by the government’s decision to row back on the full rise they were promised.

“If the chancellor wants to stop mass unemployment, the test will be how quickly today’s infrastructure announcements deliver enough good jobs in the parts of the country that need them most.

“The TUC has shown that investing £85bn in green transport and infrastructure could create more than 1.2 million jobs in two years. And the chancellor should have acted to unlock the 600,000 existing gaps and vacancies in the public sector.”

“As unemployment rises, the UK’s safety net is still broken – and the chancellor did little to fix it.

“He should have raised sick pay to at least the real Living Wage so that people can afford to self-isolate. He should have boosted universal
credit. And he should have helped working families with a rise in child benefit and extra cash to keep nurseries open.”

Steve Elliott, the Chief Executive of the Chemical Industries Association
“Several aspects of the Review are good news for our sector. As we get through the pandemic and hopefully secure a strong trading relationship with the European Union, the focus on ensuring we have the skills to deliver a new future is good news both for the economy as a whole and for people’s future job prospects”.

“The financial commitment to rebuild colleges, money for the Lifetime Skills Guarantee, extension of traineeships, sector based work academies and national careers service are all helpful. In particular improving the way the apprenticeship levy works is long overdue but we need more flexibility. In our CSR representations we have called for many of these measures and especially a complete overhaul of the apprenticeship levy”.

“The confirmation today of a comprehensive new national infrastructure strategy, UK infrastructure bank to be headquartered in the north and the £4 billion levelling up fund is also to be welcomed. So too is the mention of £14.6 billion for Research & Development and we hope the relevant detail of this is an attractive proposition that allows for growing UK investment and opportunities by chemical businesses. As the UK’s biggest manufacturing exporter, we welcome the Chancellor's pledge of more funding for trade deals.

“As ever we need to see the detail. While we rightly fight the pandemic and the economic effects of it, let us get the free trade deal with the European Union that has regulatory consistency. Our industry and our workforce are well placed to deliver net zero and levelling up ambitions and we look forward to continuing to play our part in partnership with Government”.