What will the spring budget hold for FM?

13 March 2023

On Wednesday 15th March, the Chancellor Jeremy Hunt introduces his spring budget, setting out the Government’s tax and spending plans for the years ahead...

This is Mr Hunt’s first proper budget as Chancellor, and on the same day, the OBR (Office for Budget Responsibility) will be publishing its five-year forecast for the economy. Mr Hunt’s budget is expected to focus on halving inflation, growing the economy and reducing public debt – but although he’s delivering the budget against a more buoyant backdrop than anticipated, with higher-than-expected tax revenues, growth up by 0.3% and the UK services sector rebounding by 0.5%, it’s nonetheless possible that the OBR may downgrade its growth forecast.

In the FM sector, business leaders will of course be considering how the budget may affect their business plans, and whether the measures offered by the Government help address challenges such as energy costs, capital investment and staff shortages. Steve McGregor, Group MD of property maintenance specialist DMA Group, commented: “If we're sensibly and realistically going to create a better tomorrow for everyone then we need to address our exceptional prevailing issues as well as our longer-term opportunities in equal measure.

He added: “The fundamentals for our sustained future growth must pull all the short- and long-term levers necessary to address the needs of our technology, life sciences, and climate sectors sufficiently to capitalise on our national and international opportunities. This will make us one of the most vibrant, competitive, and attractive economies to do business in throughout the world.”

Tax matters

Next month, corporation tax is set to increase from 19% to 25% on profits over £250K, bringing in around £12billion for the Treasury. Some business leaders have called on the Treasury to rethink this, arguing that it will choke off investment and reduce growth potential. Jonathan Moyes, Head of Investment Research, Wealth Club, was among those reacting to the forthcoming spring budget with a call for tax cuts: He said: “The UK economy continues to beat gloomy expectations. Led by the dominant services sector, GDP growth of 0.3% was stronger than the 0.1% expected. This follows stronger than expected performance in 2022. It may take a great deal more expectation beating data to shift the bleak expectations for the UK economy. However, a quiet, more optimistic, consensus does appear to be forming. The economic outlook is much improved, energy prices are falling sharply, China is reopening, and interest rate expectations have eased significantly.

He continued: “All eyes will now turn to Jeremy Hunt and the spring budget…With a chorus of voices calling for some relief from the highest tax burden in living memory, will the Treasury spend this unexpected growth windfall?”

Generating investment

The construction sector shrank by 1.7% in January; Dr David Crosthwaite, Head of Consultancy, BCIS (Building Cost Information Service), reiterated the need for the Chancellor to ensure the spring budget generates business investment. “Although inflation may have peaked, it is remaining stubbornly high at around 10% (five times higher than the Bank of England’s 2% target),” he said. “There’s yet no real evidence of any policies to reduce levels to the 5% forecasted by year-end, apart from blunt interest rate rises that have the potential to choke off any growth.

“While we may have avoided a technical recession so far, quarterly GDP growth is hovering around zero. These factors, coupled with high inflation, provide the ideal conditions for a stagnating economy. We really need to see the Chancellor take some bold steps in the upcoming budget, and prioritise economic growth if we’re to avoid the lost decade syndrome seen in Japan, back in the 1990s.

He continued: “Construction investment is often seen as a lever of growth, given the multiplier effect, and the Chancellor has to announce some stimulus measures to get our economy moving in the right direction, or we’ll be bumping along the bottom for years,” he said.

“Energy efficiency retrofit of the existing built stock may be one such measure, but this needs a credible delivery plan. The government desperately needs to commit to a properly funded medium term construction pipeline that will deliver growth.

He concluded: “If the UK is to maintain its position relative to other industrialised economies, we can’t have any more tinkering around the edges – we need policies that favour capital investment and tackle ingrained labour shortages.”

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