KPMG responds to the Budget
6 min read
Professional services firm KPMG analyses the 2018 Budget.
Missed opportunity to improve trading conditions as UK prepares to Brexit
James Stewart, Head of Brexit at KPMG UK
Many will feel this budget was a missed opportunity to more radically improve the UK’s trading conditions and opportunity for growth as we move towards a historic decision on our future relationship with Europe.
Brexit uncertainty has been impacting UK investment since the EU referendum - and more recently we’ve seen it soaking up valuable resources as firms spend large sums on preparing to reconfigure supply chains, move facilities overseas or build warehouse inventory. Investment decision-makers are now painfully aware of how the Brexit deal could impact the future plans of the Chancellor.
Chancellor Backs UK As Future Winner Of The Technology Revolution
Eden Dwek from KPMG’s Innovative Technology practice
The Chancellor chose not to dwell on Brexit but to instead focus on building a brighter future with innovation, technology and entrepreneurs at the heart of his announcements.
There were a number of initiatives aimed at boosting the UK startup sector and designed to help the UK position itself to be a winner in the technology revolution.
Committing £1.6bn of new investments to support our modern industrial strategy, will ensure that the UK remains a leader in new technologies such as artificial intelligence and data driven innovation, quantum computing and nuclear fusion, and this will encourage more startup businesses to focus on these areas”
Extending the startup loan funding until 2021 will be welcomed, as will the confirmation of £115m to extend funding for the Digital Catapult. We are also excited to see how the new £50 million per year fund designed to address the most pressing challenges in areas such as public health and cyber security will encourage new innovations.
There is also an opportunity for startups to help government digitise services and increase productivity, with the announcement that the Office for AI and Government Digital Service (GDS) will review how government can use AI, automation and data in new ways to drive public sector productivity and wider economic benefits.”
In what is a difficult position with the unknowns of Brexit around the corner, Philip Hammond was able to announce package of small measures to keep entrepreneurs and startup businesses happy for now.
Relief for some retailers, and promise of an even playing field
Paul Martin, UK head of retail at KPMG
There is no denying that Britain’s retail industry has been battling abrasive headwinds, and thankfully this year’s Autumn Budget took note of this unfortunate fact. As the bout of store closures, profit warnings and casualties this year will attest to, retail is undergoing fundamental structural change, and many are struggling to keep up with the pace of change.
It is often smaller, non-food retail on our local high street that appears to be taking the biggest bashing. As such, the Chancellor’s measures for smaller businesses will provide some much-needed relief for those eligible. Similarly, the money allocated for councils to reinvent disused retail space will help add to the high streets sense of community if executed correctly. That said, our mid-market non-food retail offering in the UK remains overcapacity, so it’s likely the business Darwinism in this area will continue.
It is the talk of the digital services tax from April 2020 that holds the greatest potential to rewrite how the retail game is played. Online market places have often been able to rise above the problems faced by traditional legacy players or independents. Retailers will naturally be keen to have sight of greater detail on this, meanwhile consumers may question how such a tax won’t result increased pricing for them.
Budget 2018 avoids potholes, but stalls on carmakers
Justin Benson, Head of Automotive at KPMG UK
The £420m announced by the Chancellor to improve the UK’s roads by repairing potholes is good news for drivers, particularly for those in the freight industry. Our roads have been underinvested in for the last decade, deteriorating each winter, and this boost to Britain’s infrastructure will put us on a firm footing, particularly as businesses ramp up their exports.
With the development of autonomous and electric vehicles, the relief for buying IP-rich firms is extremely important for the UK’s automotive sector to achieve sustainable growth and to continue competing on the global stage. It was, however, disappointing to not see any incentives for carmakers in the short-term, particularly to encourage consumers to buy electric vehicles. This would have been helpful in countering current trends in car sales as uncertainty will continue to loom until after Brexit.
SME support will help futureproof UK financial services
Tim Howarth, Head of Financial Services Consulting, KPMG UK
Financial technology firms make up a crucial segment of the UK’s SME scene, in the first half of 2018 they attracted more investment than any other country in the world. The measures to support SMEs, announced by the Chancellor today, are a positive step towards futureproofing the UK’s financial services sector.
The extra £200m for the British Business Bank and halving the apprenticeship levy for SMEs will play an important role in helping our entrepreneurs reach scale and remain robust. Brexit could cause significant disruption to the supply chain, talent pipeline and credit options for start-ups so the Chancellor’s support will be especially welcomed at this time.
When you combine these new measures with the RBS alternative remedies package and supportive regulations like open banking, the UK looks a pretty attractive place to be for fintechs and finance customers alike.
Exporters will demand more tangible support as Brexit approaches
David Slater, Director of Trade at KPMG UK
The country’s ambition for strong economic growth is said to be pinned on UK exporters, but the Budget could have done more to offer tangible, fiscal-based incentives for businesses to sell their goods and services abroad. Exporters will demand more support as Brexit approaches.
Although the money for UK Export Finance will be welcome in helping some exporters win, fulfil and get paid for contracts, it isn’t clear how the money will be made available. We should also remember that only a relatively small proportion of exporters use these facilities.
Calls to make Scotland global hub for oilfield decommissioning welcome
Martin Findlay, senior partner at KPMG in Aberdeen
The Chancellor’s announcement of a desire to make Scotland a global hub for oilfield decommissioning is welcome. However, the call for evidence that was trailed in the Budget needs to be a quick one. Although oilfield decommissioning may be slower than would be the case had oil prices remained low, other countries are already moving to secure their share of the spoils of decommissioning work. The UK needs to move quickly and target appropriate investment and industry assistance appropriately.
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