It is Budget week and Chancellor of the Exchequer Rishi Sunak presented HMG’s Budget 2021 to the House of Commons on 3 March 2021. The Chancellor outlined measures in the Government’s Build back better: our plan for growth budget aimed at supporting jobs and businesses and stabilizing public finances.
Budget summary:
- Business: £126m to fund 40,000 more traineeship places; new restart grant to help businesses re-open – non-essential retail to receive up to 6k per premise and up to £18k for hospitality and leisure businesses; Cultural and Sports recovery fund; Film and TV restart fund; The Coronavirus Business Interruption Loan Scheme (CBLIS) and Coronavirus Bounce Back Loans Scheme (CBBLS) replaced with Recovery Loan Scheme; tapered business rate for most affected sectors and extension of 5% VAT to September 2021, 12.5% till April 2022.
- Employment: The Job Retention Scheme (JRS) is extended until September 2021 with tapered government contributions; Universal Credit uplift extended and one-off payments available; stamp duty extension and 95% mortgage guarantee scheme; addressing domestic violence programme and funding for army veterans with mental health conditions.
- Public finances: personal tax allowances stand at £12,570 and £50,270 next year (until April 2026); corporation tax to increase to 25% in 2023; Super deduction meaning that companies will have a capital investment allowance of 130%; planned duties cancelled.
- Future: the creation of the UK Infrastructure Bank, will have an initial capitalisation of £12bn and is expected to support at least £40bn of total investment in infrastructure. Support for small and medium-sized enterprises to grow through two new schemes to boost productivity: Help to Grow: Management, a new management training offer and Help to Grow: Digital, a new scheme to help 100,000 SMEs save time and money by adopting productivity-enhancing software, transforming the way they do business.
- The Government is launching the prospectus for the £4.8 billion Levelling Up Fund alongside Budget.
- £1bn new town deals confirmed – this includes funding for Wolverhampton, Rowley Regis, Smethwick and West Bromwich.
- A number of Freeports announced, the closest to the region is East Midlands Airport.
Regional priorities announced:
- £59m for five new stations in the region in the Black Country and south Birmingham.
- £50m will go to Solihull Council’s Urban Growth Company to help fund transport improvements around the HS2 Birmingham Interchange Station.
- £116m for the regeneration for Rowley Regis (£19m), Smethwick (£23.5m), West Bromwich (£25m) Wolverhampton (£25m) and Nuneaton (£23.5m).
- A £10m Wolverhampton-based Government taskforce to work with the WMCA in developing new construction technologies including low carbon, energy-efficient homes.
OBR – GDP is expected to grow by 4 per cent in 2021 and to regain its pre-pandemic level in the second quarter of 2022, six months earlier than we forecast in November. Unemployment still rises by a further 500,000 to a peak of 6.5 per cent at the end of 2021, but the peak is around 340,000 less than the 7.5 per cent assumed in our November forecast, thanks partly to the latest extension of the furlough scheme. The pandemic is nevertheless still expected to lower the supply capacity of the economy in the medium term by around 3 per cent relative to previous expectations.
Economic overview
- WMCA 3 LEP area had 261,300 employments furloughed on 31st January 2021. This reflects 14.5% take-up of eligible employments for the scheme, compared to the UK average of 15.6%. At the UK level, those aged 25-34 years old accounted for the highest proportion of the total number of employments furloughed at 21.9% (1,029,200), followed by those aged 35-44 years old at 19.3% (909,400) and then those aged 45-54 years old at 18.2% (857,000). Accommodation and food services accounted for the highest proportion of UK employments furloughed at 24.4% (1,147,200). This was followed by wholesale and retail at 20.0% (938,500) and then administrative and support services at 8.2% (387,000).
- 9% of trading businesses in the West Midlands reported their turnover had decreased by at least 20%. However, 36.7% of trading businesses in the West Midlands reported that their turnover was unaffected and around 7% reported their turnover had increased by at least 20%. 43.1% of trading businesses in the West Midlands reported profits had decreased by at least 20%. However, 35.0% of trading businesses in the West Midlands reported that profits had stayed the same and approximately 7% reported their profits had increased by at least 20%. 52.9% of West Midlands businesses reported prices did not change any more than normal, 14.8% reported prices increased more than normal and 8.0% of West Midlands businesses reported some prices increased and some prices decreased. 11.0% of responding West Midlands businesses reported they were stockpiling goods or materials.
- At a West Midlands regional level, there were approximately 259,000 of the population eligible for the third grant of the Self-Employment Income Support Scheme (SEISS), which is a take-up rate of 65% based on the total number of claims of 170,000. This can be split further by gender and there was a total potentially eligible male population of 185,200 for the third grant of the SEISS, which equates to a take-up rate of 68% at the end of January which is based on the total number of claims of 125,200. There were 74,200 eligible female population for the West Midlands region with a take-up rate of 60% based on the total number of claims of 44,400.
- PWC released a report this week which highlights:
- Whilst COVID-19 brought communities together to support the vulnerable, it has exacerbated inequalities with 44% of people feeling that the pandemic has increased social divisions since it started.
- After a year spent closer to home, the public wants housing, high streets, jobs and skills to top the levelling-up agenda, with housing a standout priority.
- 67% of West Midlands public surveyed say a focus on housing would be most effective in levelling up the country.
- The majority of the public would nevertheless recommend their area as a place to live.
- Low levels of public trust is a challenge for central government but create opportunities for charities, local government and businesses to build on trust earned through the COVID-19 response.
- It was reported this week that Stoke-on-Trent has announced it is to work with Capital & Centric to create a new urban quarter, The Goods Yard, next to the city’s main train station. Developer Capital & Centric has been appointed to bring forward £75m million plans for a key regeneration site in Stoke-on-Trent.
- Horton’s Estate has also secured planning approval this week for the Birchley Island Retail Park, to deliver a 65,000sq ft retail park.
- It was reported this week that work had begun on a data centre at the Worcester Six Business Park for one of Europe’s largest data-hosting companies. Property developer Stoford secured planning for a facility of more than 50,000 sq ft for IONOS and its subsidiary UK brand, Fasthosts.
- The Kalifa Review of UK Fintech was set up in the 2020 Budget to conduct an independent review to identify priority areas to support the UK’s fintech sector. The report highlighted that the clusters, including Birmingham, were a worthwhile focus, as they are recognised as powerful economic and social development tools that empower innovation and show more resilience. Birmingham qualifies as an established cluster with a growing financial services presence.
- City Monitor argues that smart cities are on the decline, thanks in fact to the pandemic. People don’t want their cities smarter, thanks to growing concerns about data security, but tech that tackles serious concerns like racism or the environment will continue to grow.
- Disabled people are still being left behind and let down by the welfare system despite decades of attempted reform, The Social Market Foundation reports.
EU Exit
- A report by the UK in a Changing Europe investigating changes in UK Policy and regulation lists four main findings:
- Significant variation between policy areas, sectors and sub-sectors regarding policy continuity, the government had enacted major change in only two of the domains considered in the report: immigration and agriculture. In several others, including data protection and fisheries, the UK has rolled EU regulations into domestic law with minimal change.
- UK government gave new or existing UK bodies responsibility for regulatory tasks that had previously been carried out by EU institutions and agencies. However, in some cases, preparatory legislation was not passed early enough to allow regulators sufficient time to become operational before the end of the transition period.
- Although a no-deal BREXIT was avoided, the Trade and Cooperation Agreement (TCA) did not resolve all matters once and for all. In some domains, there are still issues yet to be agreed, therefore the new regulatory settlement is not yet complete.
- Whilst part of the aim of Brexit may be to ‘de-Europeanise’ UK regulation, this has only been partly realised. The analyses also suggest that this is unlikely to materialise in the long-run as well.
- The British Chambers of Commerce have set out below some of the measures they would like the government to adopt at this early stage to help businesses as they adjust to the UK’s new trading position with the EU:
- Allocate long-term funding to the Customs Grant Scheme.
- Support firms in adapting to the new trading arrangements with the EU through the introduction of a temporary SME ‘Brexit’ tax credit until 2022/23.
- Delay the imposition of additional Sanitary and Phytosanitary (SPS) checks (from April) and full customs checks (from July) on imports into the UK.
- Invest in new market suitability and market research service to reduce the uncertainty of investing in a new export strategy.
- Deliver a long-term investment plan for expanding the network of expert international trade advisors (ITAs), to be fully integrated with existing programmes and delivery.
- Support the automotive sector in building up the UK’s domestic battery industry in time for when the six-year phase-in of rules of origin requirements (included in the UK-EU trade deal) ends in 2027.
Download and view a copy of the West Midlands Weekly Economic Monitor.
The weekly monitor brings together data and intelligence from the WM REDI partnership into one single source which can be shared and utilised in planning and responding to the challenge of the virus. This is a rapid review of the issues. It is not intended to be a comprehensive assessment but rather a practical report which places emphasis on emerging issues and the best data and intelligence we have to date.
The monitor is feeding into the regional recovery planning that can help the regional economy bounce back and quickly move forward once lockdown restrictions start to be lifted.
The work is being endorsed by political and business leaders a task force of experts are being set up through WM REDI partners to better understand the impact of the lockdown and what measures will be needed to get the economy moving again.
City-REDI / WM REDI has developed a resource page with all of our analysis of the impact of Coronavirus (COVID-19) on the West Midlands and the UK. It includes previous editions of the West Midlands Weekly Economic Monitor, blogs and research on the economic and social impact of COVID-19. You can view that here.
This blog was written by Rebecca Riley, Business Development Director, City-REDI / WM REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.