Mark Gregory, EY UK’s chief economist, comments:
“The Chancellor announced that a fiscal boost of £30 billion would be available to help the country navigate the Covid-19 outbreak. The scale of support as a share of national income is broadly similar to the amounts allocated by countries such as Ireland and Italy, with the focus on making employees and business more capable of weathering any Covid-19 induced impact to their finances. Time will tell if the response is adequate, but the Chancellor’s response should provide some short-term relief as we wait for events to unfold.
“The Chancellor was unable to resist the usual headline grabbing moves with freezes on the duty on beer, cider and wines, and an allocation of £11 million for the Scotch Whisky industry and an increase in the business rate discount for pubs is a welcome boost to communities around the country that have seen their local facilities disappear. However, the failure to change the policy of freezing fuel duties is likely to lead to more vehicles on the road while the moves on red diesel are very slow.
“Before the Covid-19 outbreak started, expectations around this Budget had been very high. The Government was elected on the basis of an ambitious, if detail free, manifesto based on two key objectives. First, ‘levelling up’ the country, widely seen as boosting economic growth and opportunity in towns across the country, especially in the North and Midlands. And, second, responding to the need to tackle the risks associated with the climate by developing plans to help the UK achieve net zero by 2050.
“The Chancellor promised much: £600 billion of investment over the next five years and a commitment to “getting it done” across a range of areas of the economy. But the sheer volume of announcements, the lack of a forecast incorporating the possible impact of Covid-19, and the limited supporting detail mean it will be very hard for businesses to develop detailed plans to respond to the proposals.
“The announcement of a £22 billion investment in R&D will be welcomed by business, as will the allocation of £5 billion for gigabit-capable broadband and £510 million to improve 4G coverage. But the lack of details over the bulk of spending makes it difficult to assess the longer-term implications especially for the objectives of net zero and ‘levelling up’.
“The Chancellor announced that the Treasury is working on a more detailed strategy that will be produced in the run-up to COP2020. So, while the allocation of £1 billion for green transport solutions, £800 million for carbon capture and storage solutions, a shift in the balance of taxation from electricity to gas, are all positive moves for the journey to net zero, they are insufficiently detailed or wide-ranging enough to shift investor perspectives.
“Similarly, on ‘levelling up’, the Chancellor announced a new devolution deal for West Yorkshire, a series of schemes for road and rail and a range of transport settlements, more funding for further education and a welcome proposal to move up to 22,000 civil servants outside of London over time. But, just as with net zero, detail was limited. Businesses understand the Government wants to rebalance the economy geographically, but they will require significantly more detail and guidance to make them confident enough to adapt their strategies.
“Businesses are likely to conclude this is a holding budget and focus on getting through the short-term challenges while waiting for more detail on the flagship policies and the outcome of negotiations on the UK-EU trade deal. Business investment is likely to remain subdued for the immediate future.”