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Autumn Budget 2021 – What does it mean for investment in capital equipment?

The Chancellor of the Exchequer presented his budget on 27 October, claiming that the measures being taken, along with the support already provided to individuals and businesses (during the lockdowns between March 2020 and July 2021), would give the UK Economy every opportunity of prospering in the ‘Post-Covid World’.

Most notable so far as capital equipment sales are concerned was a decision to extend the £1,000,000 Annual Investment Allowance from 30 December 2021 until 31 March 2023, at which time Super-Deduction is also due to end.

  • The construction sector is set to prosper from increased public spending to fund road building and public transport links.
  • Some of the additional funding earmarked for the NHS will also be allocated for the acquisition of the latest technology, in areas such as diagnostics, which will provide new sales opportunities for manufacturers and suppliers of medical equipment.

Perhaps more significant than the Budget Policy announcements was the report that accompanied the Chancellor’s statement by The Office for Budget Responsibility (OBR). Chancellors use data from the OBR to assess how much money governments have available to spend on public services or to cut taxes. In this case, the OBR were able to report that economic growth was running at a faster rate than predicted earlier in the year, giving the Chancellor a £33 billion reduction in the level of expected borrowing over the mid-term. Half of this will be used to help fund additional public spending and the rest held in reserve for possible further increases in spending or pre-election tax cuts.

Given the large change in economic growth forecasts from March to October this year, there is of course a strong chance of further amendments to the current forecast, as we move through next year. The downside? The risk from an extended period of high inflation and associated increases in interest rates, as well as the potential for prolonged supply-side disruption caused by shortage of stock and labour. Some or all of these factors could reduce the predicted rate of economic growth in 2022, with high inflation being a particular threat, since it reduces the spending power of those consumers who do not receive a correspondingly high uplift in their income. Also, a further risk is that Covid will return with all its associated risks to the Economy and cannot be ruled out.

It is perhaps for these reasons that the Chancellor is holding onto some of the windfall presented by the OBR.

Leasing and Asset Finance can be very useful tools in overcoming the challenges presented by a higher level of price inflation and an environment where interest rates are rising.

Disclaimer
BNP Paribas Leasing Solutions is not authorised to provide tax advice. You should consult an accountant in order to understand the tax consequences of any investment decision.

Andy MilsomAndy Milsom, Head of Partner Training & Development at BNP Paribas Leasing Solutions

Andy is an experienced sales and finance professional with over 25 years’ experience in sales aid leasing. Andy is widely recognised as an expert in business finance and has in recent years focused his attention on developing partner sales teams develop an understanding of how businesses secure project financing. His training programme – Finance Unlocked – is a highly rated customisable course and is offered at no cost to partners.

If you’re interested in helping your sales team overcome finance-related hurdles during the selling cycle, please get in touch with Andy on 07966 114 243 or email here.

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