Autumn Statement 2023

John McIIroy | 22 Nov 2023 | General

Key points from Autumn statement

The Autumn Statement from UK Chancellor Jeremy Hunt included some interesting announcements for trade and investment. Below we highlight some key points and give our initial thoughts. Over the next few days, we will continue to digest the information and what it means for our clients and the broader world of trade and investment.

Increase in Investment Zones

Summary of announcement: Financial incentives for Investment Zones and tax reliefs for Freeports have been extended from five to 10 years. This also comes with a new £150m Investment Opportunity Fund to support Investment Zones and Freeports to secure specific business investment opportunities

There will also be another three advanced manufacturing Investment Zones in the East Midlands, West Midlands and Greater Manchester, and an additional Investment Zone in Wales

Initial thoughts

  • Extending the length of time for tax reliefs and increased funding will be welcomed by current and potential investors and help promote the Investment Zones and Freeports to international investors.
  • Adding up to four new Investment Zones needs to be balanced against ensuring each site is sufficiently distinct to avoid sites competing against each other.

 

Funding for strategic sectors

Summary of announcement: An additional £4.5bn of support between 2025 and 2030 was announced for strategic manufacturing sectors: £2,000m for automotive; £975m for aerospace; £525m for life sciences; and £960m for the Green Industries Growth Accelerator to support clean energy

The government will also invest £500m over the next two years to fund two more Compute innovation centres, supporting the development of artificial intelligence.

Initial thoughts

  • This investment will help support the UK transition to a low carbon economy by attracting more investment in key sectors.
  • FDI in these sectors has created over 100,000 jobs in the last ten years, and this funding should make the UK more attractive to international investors – thus adding more jobs.

 

Tax relief for investment

Summary of announcement: The 100% tax relief on capital investment on qualifying plant and machinery investments has been made permanent. First announced in the Spring Budget this was originally due to end in March 2026.

This tax break, known as ‘full expensing’ allows companies to write off the cost of investment in one go and for every pound a company invests, their taxes are cut by up to 25p. Most tangible capital assets, other than land, structures and buildings, used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances

Initial Thoughts

  • This makes permanent a scheme announced in 2023 (in part an attempt to soften the impact of the increase in corporation tax to 25%), so no immediate change as it was due to run until March 2026. But it does provide the increased certainty that investors are looking for.
  • The scheme is generous and simple to apply for compared to other tax deductions that were available. It gives the UK the most generous tax relief for capital investment incentives in the G7
  • UK business investment is lower than other G7 nations and there is a need for investment in green technologies and digitalisation (see also new funding for strategic sector)

 

UK FDI support

Summary of announcement: The government stated has accepted in principle the headline recommendations of Lord Harrington’s review into increasing foreign direct investment. This includes writing a new Business Investment Strategy by 2024, increasing the amount of cross-departmental support for FDI, and increasing the tools available to the office for Investment (OFI).

The review also recommends better co-operation and co-ordination between national and local authorities, including additional expert resource located across the UK, clearer local strategies that differentiate strengths and reduce competition between areas, and more top-tier investment ready sites across the UK.

Initial thoughts

  • We welcome the increased importance given to FDI within the report, including an increased cross-departmental focus, a desire for a new Business Investment Strategy, and a new cross-government Investment Committee.
  • More involvement and co-operation between national and local authorities on place-based, sector-specific offers should strengthen the UK’s ability to attract investors and reduce duplication. Evidence based assessment is required to ensure an objective assessment of local strengths.
  • Providing the Office for Investment with additional resources from across government should increase the ability to attract high-profile strategic investors.

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