Hunt leaves Britain’s biggest businesses nursing major tax hikes

Chancellor Jeremy Hunt’s autumn statement was an attempt to put public finances in order while getting the UK economy back on track.

Thursday’s autumn statement was a mixed bag for Britain’s largest companies, which were left to weigh the impact of new policies such as the extension of the energy price guarantee, increased R&D spending and the lifting of tariffs on more than 100 imported goods. goods.

But proposals aimed at economic growth have been overshadowed by significant tax increases, which will push the UK’s tax burden to its highest sustainable level in seven decades and threaten to discourage investment spending.

Thursday’s announcement of a new 45 percent windfall tax on electricity generators initially took its toll on the share prices of London-listed companies such as Drax Group, British gas owner Centrica and wind farm operator SSE.

But they bounced back quickly after the chancellor confirmed the extension of the energy price guarantee, leading to a rise in the FTSE 350.

The ten percentage point increase in the Energy Profits Levy for oil and gas producers, who will now pay three-quarters of their profits from UK operations to HM Treasury, has barely dent the shares of BP and Shell.

The energy giants have been signaling the possibility of an imminent windfall tax for some time now.

Shareholders with modest portfolios were told their dividend payout would be cut by half to £1,000 in April and cut in half again the following year.

In addition, the annual capital gains tax exemption will be reduced by more than 50 per cent to £6,000 in April 2024.

This knocked out retail investment firms AJ Bell and Hargreaves Lansdown, which were some of the biggest fallers on the FTSE 350 index on Thursday.

Performance: Companies like SSE, Drax Group and Centrica saw their shares grow Thursday despite announcing a new 45 percent windfall tax on electricity generators

Britain’s Institute of Directors expressed concern at its fall statement on the latest proposal, warning it could have implications for companies using stocks as an employee incentive.

Kitty Ussher, the group’s chief economist, further criticized the UK government for not including tax incentives that could help employers upskill their skills in industries and areas with national skills shortages.

She said: ‘As a result, there remains a gap in public policy on how to address adult skills shortages. We would like to see a comprehensive and systematic plan to anticipate and address labor shortages across the economy.”

Nevertheless, the IoD welcomed many of the measures aimed at businesses, including the freezing of the lower employer rate of National Insurance, the rate abolitions and temporary relief for those affected by the revaluation of corporate rates.

The latter proposal has been recommended by the Confederation of British Industry, British Retail Consortium and UKHospitality, all of whom welcomed its inclusion in today’s autumn statement.

Another well-received proposal announced today was the Solvency II reforms, which the UK government wants to shake up to try to spur a new ‘Big Bang 2.0’ by tapping new sources of investment.

Two of the UK’s most prominent financial services leaders, Amanda Blanc of Aviva and Andy Briggs of the Phoenix Group, expressed their strong endorsement of the plan.

“These regulations are an important part of the changes needed in the wider UK investment landscape, enabling Phoenix to deliver on its ambition to invest more in the future,” Briggs noted.

He noted that the insurance services company planned to spend between £40bn and £50bn over the next five years on illiquid assets and sustainable investments.

But despite support for the new Chancellor’s measures, Hunt acknowledged that the UK economy was in a fragile period, with recession looming and inflation set to remain well above the Bank of England’s 2% target for some time to come. England.

With consumers seeing their discretionary income squeezed by rising energy and food costs and further rate hikes looming, many companies are likely to see their profit margins squeezed and scale back their investment plans.

Many of the Chancellor’s moves have been welcomed by industry leaders, but as Rain Newton-Smith, the CBI’s chief economist, noted, “Businesses will think there’s more to be done about growth.”