Brexit update following Autumn Statement
November 24th, 2016 by Malcolm McGready - Partner
The Chancellor of the Exchequer made his first and last Autumn Statement yesterday. He announced a change to the current bi-annual round of policy changes, moving it to an Autumn Budget and review of the OBR’s forecast in the Spring; turning the clock back in effect.
The groundwork had been put in place such that we weren’t expecting any huge give-aways. The backdrop was the post-Brexit economic situation with the OBR’s forecast setting the tone. Economic forecasts were downgraded with the knock-on impact on public sector finances. A major reason for this being attributed to both uncertainty and costs associated with Brexit. The commitment to balance the books by the end of the Parliament became a casualty of the bleaker outlook.
However, it was interesting to note that the OBR ‘…would not be able to forecast on the basis of fully specified Government policy in relation to the UK’s exit from the EU…’ i.e. they know about as much about the Brexit process as the rest of us. There will no doubt be much wrangling over these forecasts in the coming days and weeks by the opposing camps. However, they are forecasts based on assumptions (broad brush in relation to Brexit by the OBRs own admission) and rarely do things play out as forecast.
What concrete news was there for business? It was confirmed that the rate of corporation tax would fall to 17% by 2020. When I started training the main rate was 33% and there will be those who remember it being even higher. So this is good news for business. Also announced was a £23bn fund for infrastructure and innovation together with further funding announced to support investment in technology and R&D which largely comes about as a result of a relaxation of fiscal targets. Details behind these commitments will no doubt be made in due course.
In summary, the Chancellor was limited in what he could do against a background of deteriorating public finances (albeit a forecast scenario), but needed to give a positive story beyond this to businesses operating in a post-Brexit world.
The Government clearly have a difficult path to tread. On the one side has been the rhetoric around hard Brexit and on the other are the needs of many businesses who are looking for a smooth transition with no sudden shocks. From everything I have been reading and hearing lately, the thinking is that it is looking increasingly unlikely that negotiations will be concluded with a two year time frame and the plan for transition outside of this is critical. But in the meantime and in the absence of any other information business must continue day to day.
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