Britain’s Chancellor, Jeremy Hunt, has announced that the UK economy is “back on track” as he unveiled various tax measures in his Autumn Statement to make the country’s companies more attractive to foreign investors.
As the UK approaches an election year, the ruling Conservative party is trying to formulate policies to boost the economy and appeal to voters, as it lags behind the opposition Labour party in the opinion polls.
Mr Hunt said on Wednesday that his plan to boost British businesses has “110 growth measures”, some of which are aimed to “unlock foreign direct investment” and “boost productivity”.
“Our plan for the British economy is working. But the work is not done,” he said.
Mr Hunt said the government would set up a “concierge service” for large international investors in a bid to attract more foreign direct investment (FDI).
He added that he would accept the headline recommendations of a review led by former business minister Richard Harrington into how Britain can better attract FDI and that funding for the Office for Investment would be increased to deliver it.
Mr Hunt said his measures would look to boost trade and confirmed that the series of tax breaks at the UK’s freeports will be extended.
UK Chancellor Jeremy Hunt unveils Autumn Statement with cut in National Insurance
Freeports are special investment zones where normal tax and customs rules do not apply, which means that goods can be imported, manufactured, and re-exported without being subject to tariffs. The idea is that the freeports stimulate trade, create local jobs and attract investment.
“I have today decided to extend the financial incentives for investment zones and tax reliefs for freeports from five years to 10 years,” Mr Hunt said.
“I will also set up a new £150 million investment opportunity fund to catalyse investment into the programme.”
The Chancellor also announced there would be three new investment zones in the West Midlands, East Midlands and in Greater Manchester, which would “help catalyse over £3.4 billion of private investment and 65,000 new jobs”.
Full expensing
Aiming to increase investment in British-based companies, Mr Hunt announced what he claimed is the “largest business tax cut in modern British history”.
That tax cut is making “full expensing” permanent. The measure, introduced in this year's Budget, had been due to run out in April 2026.
It allows companies to claim 100 per cent of the capital they spend on new machinery and effectively means that for every pound invested, their tax bills are cut by 25p. Business lobby groups had pushed for it to be made permanent.
The Chancellor said he had previously avoided making full expensing permanent because of the £11 billion annual cost, but it was now “affordable”.
“It means we have not just the lowest headline corporation tax rate in the G7 but its most generous capital allowances,” he added.
Alice Jeffries, tax policy manager at the Confederation of British Industry (CBI), said: “Permanent full expensing can be a win all round for business, the government and the economy.
“The CBI’s own research with Oxford Economics found a permanent full expensing policy could lead to a 21 per cent increase in the level of business investment per year by 2030/31 (an extra £50 billion a year).
“And that would equate to a 2 per cent bump to GDP [Gross Domestic Product] – £53 billion higher than it would otherwise be.”
Economic forecasts
Mr Hunt said the UK economy will grow by 0.7 per cent next year, citing forecasts from the Office for Budget Responsibility (OBR).
This is a downgrade from the 1.8 per cent prediction made by the OBR at the time of the Chancellor's Budget back in March.
The OBR's forecasts for economic growth in the UK are now at 1.4 per cent in 2025 and 1.9 per cent in 2026.
Nonetheless, Mr Hunt told the House of Commons that the economy had “outperformed expectations” since last year's Autumn Statement and the government had met its own fiscal rule “to have underlying debt falling as a percentage of GDP in the final year of the forecast, with double the headroom compared to the OBR's March forecast”.
“And we continue to have the second-lowest government debt in the G7 – lower than the United States, Canada, France, Italy or Japan.”
The pound was largely unmoved by the Chancellor's speech. It was trading at $1.2501 following Mr Hunt's speech compared with $1.2543 just before he delivered it.
Israel-Gaza conflict
Mr Hunt expressed his “horror” at the violence and loss of life on both sides in the Israel-Gaza war.
“I am deeply concerned about the rise of anti-Semitism in our country, so I am announcing up to £7 million over the next three years for organisations like the Holocaust Educational Trust to tackle anti-Semitism in schools and universities,” he said.
“I will also repeat the £3 million uplift to the Community Security Trust.
“When it comes to anti-Semitism and all forms of racism, we must never allow the clock to be turned back.”
Green investment and AI
Mr Hunt said he would publish a longer-term strategy for the advanced manufacturing and green energy sectors, adding that the government will provide £4.5 billion over the five years to 2030 in order to attract investment into strategic manufacturing sectors.
The Chancellor also said he would develop “further capital market reforms, to boost the attractiveness of our markets, and the UK, one of the most attractive places to start, grow and list a company”.
This would include an extra £500 million of investment over the next two years to fund further “innovation centres to help make us an AI [artificial intelligence] powerhouse”.
From early January, workers will see more money in their pay packets, following Mr Hunt's announcement that he would cut the main rate of national insurance for workers from 12 per cent to 10 per cent, which he claimed would “help 27 million employees”.
“It means someone on the average salary of £35,000 will save over £450. For the average nurse, it is a saving of over £520 and for the typical police officer it is a saving of over £630 every single year.”
The self-employed will also benefit from tax cuts. Mr Hunt added.
“From April 2024, Class 4 NICs [National Insurance Contributions] for the self-employed will be reduced from 9 per cent to 8 per cent and no self-employed person will have to pay Class 2 NICs, saving the average self-employed person on £28,200 a year £350 in 2024/25,” he said.
Mr Hunt also claimed to be making “one of the largest-ever cash increases of the state pension”.
“From April 2024, we will increase the full new state pension by 8.5 per cent to £221.20 a week, worth up to £900 more a year. That is one of the largest ever cash increases to the state pension – showing a Conservative government will always back our pensioners.”
Welcomes and disappointments
There was a broad welcome from business groups to the Chancellor's Autumn Statement.
Dr Roger Barker, Director of Policy at the Institute of Directors, said the “improved focus on foreign direct investment will benefit the longer-term prospects of the UK economy”.
Others were more concerned about whether the Chancellor's tax cutting plans were focused on next year's election and not paying heed to the risk of higher inflation as more money enters the economy through workers' pay packets.
“It may be excessive to think that it will trigger higher interest rates, but potentially it could delay the point next year when the MPC (Bank of England's Monetary Policy Committee) moves to bring rates down,” said Philip Shaw, chief economist at Investec.
“Full expensing should be a major lift to UK industry and to the longer term macro outlook where improving the UK’s woeful pace of productivity growth is critical.”
Some analysts were disappointed by what the Chancellor didn't mention, rather than what he did.
Before the speech, rumours swirled around the markets that Mr Hunt might cut or abolish inheritance tax, make some major changes to stamp duty or another tweak to boost the property market. In the event, he made no indication of any of those, leaving some feeling deflated.
“Another underwhelming Autumn Statement where the housing market is concerned,” said Marc von Grundherr, director at Benham and Reeves.
“Much like unwrapping a pair of socks on Christmas Day, it lacked imagination and left us feeling largely disappointed.
“It’s clear they have run out of ideas when it comes to addressing the current issues plaguing the property market. Hardly surprising when we have housing ministers coming and going more frequently than the postman.”
