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The Chancellor’s Spring Statement

On 13 March Chancellor Philip Hammond presented a ministerial statement outlining the performance of the UK economy and a brief guide to future spending plans.

Some of the key points are highlighted below.

UK productivity

The Chancellor confirmed that improving productivity remained a high priority. He said that one of the biggest casualties of the current BREXIT uncertainty was reduced investment by UK businesses and noted that productivity can only be increased if businesses invest in the latest technology.

Annual Investment Allowance

The Chancellor has already taken steps to address this issue and amongst the most ‘eye catching’ proposals announced in last year’s Autumn Statement was that the Annual Investment Allowance was to be raised to £1,000,000 for 2019. This means that a business can buy up to £1,000,000 of capital equipment (allocated to their own financial years) and offset the full cost against tax in the year of purchase.

Leasing in all its various forms remains a highly favoured method by which companies can acquire the equipment needed to generate productivity without having to outlay large amounts of cash. Further, Annual Investment Allowances are available for Hire Purchase agreements meaning that the tax benefits are gained before having to pay for the equipment.

GDP

  • 2019 GDP growth forecast to be 1.2%, lower than the 1.6% forecast in October of last year.
  • Forecasts for each of the next five years predict that our annual growth rate will remain below 2% which is much lower than the average achieved in the decades preceding the financial crisis of 2008/2009. Given a growing population, GDP growth per head is likely to be at a level where it will remain difficult to see any sizeable improvement in living standards.

Employment

  • Unemployment remains at historically low levels and there has been a recent acceleration in the rate of pay increases. With inflation now close to the 2% target and wages rising at an average rate of about 3%, the Chancellor said that people were at last starting to see real increases in their spending power.

Public finances

  • Forecast for borrowing to be £3bn lower in 2018-19 than forecast in the autumn budget, and for further reductions year on year for the next five years. Borrowing is now down to just 1.1% of GDP.
  • Debt is forecast to be 82.2% as a share of GDP in 2019-20, falling to 73% in 2023-24. National debt is of course much higher than it was pre-crisis and falling only slowly.

Spending

  • The Chancellor advised that a Treasury 3 year spending review would be conducted in the summer and details of departmental budget allocation will be provided in the Autumn Statement.
  • It was announced that £4bn would be made available to maintain the improved rate of house building.
  • £100 million will be made available to the police this year specifically targeted to reduce the current level of knife crime.
  • Some money was set aside for projects to improve productivity.
  • There was a very clear warning that an ability to take advantage of the unexpectedly improved state of the public finances through increased spending could only happen if the UK left the EU with a deal.

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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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