Spring Statement: Philip Hammond’s ‘warm words’ on Brexit not enough, say British businesses

Confidence at rock bottom and investment plans are eroding away, says Institute of Directors

New funding for building affordable homes will go nowhere near far enough to make up the current shortfall, say critics (PA)

Philip Hammond’s Spring Statement garnered a mixed reaction of business leaders, with the speech overshadowed by the imminent threat of a no-deal Brexit.

The chancellor’s £3bn affordable homes fund was accused of not innovative enough to solve the housing shortage, while his plans to tackle dominant tech giants like Google and Facebook contained few actual commitments – nor did proposals to cut carbon emissions.

In a speech light on spending announcements Mr Hammond’s plea for MPs to back a Brexit deal and avoid a chaotic EU departure did little to impress business groups.

“Warm words and proposed consultations are not enough for businesses at a time when confidence is rock bottom and investment plans are eroding away,” said Edwin Morgan, interim director general of the Institute of Directors.

“Many will find it difficult to tread water until more decisive action at the autumn Budget.”

He pointed to the fact that economic growth forecasts had been revised down, even based on a smooth exit from the EU.

“On the upside, public finances are in rude health, but the chancellor missed a vital opportunity to outline more clearly how this might be used to build a positive long-term economic vision for businesses to get behind.

“Today has turned out to be even more of a non-event than anticipated, and it is yet further evidence of how the Brexit process is sapping the momentum from our domestic economic policy agenda.”

The Confederation of British Industry was more charitable to the chancellor, describing his speech as “admirable” given the circumstances.

“The chancellor’s rightly identified the need to go further and faster in combating climate change,” said the CBI’s chief economist Rain Newton-Smith.

“His ambition for all new homes to be heated sustainably will ensure we make better progress towards a zero-carbon economy,”

Affordable homes

Mr Hammond announced a new £3bn guarantee scheme which will go towards building around 30,000 affordable homes.

In addition, £717m is to be used from the Housing Infrastructure Fund to unlock up to 37,000 new homes in west London, Cheshire, Didcot and Cambridge.

But critics pointed out that it would not go anywhere near far enough to meet the government’s target of building 300,000 new homes each year.

“Whilst £3bn is a substantial sum and more investment is certainly welcome, we have to ensure that this doesn’t feed into any form of house price inflation – coordinated action is what’s needed here,” said Jan Crosby, UK head of housing at KPMG.

“Such coordination around place-making has been evident in recent announcements, with noise around consultation on infrastructure finance and planning getting more of a review, but in my mind it is innovation that is lacking.”

Big tech crackdown

A new review will look into the dominance of digital advertising by technology giants but it is unlikely to rattle the likes of Google and Facebook.

“In and of itself, the chancellor referring the digital advertising market to the competition authority won’t take too many cents off the share prices of Google and Facebook,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.

“However it’s part of a global ‘techlash’ which has ramped up scrutiny on the tech giants, and is likely to lead to increased costs to improve practices on privacy, taxation, and content.”

Mr Hammond also confirmed that that he would proceed with a tax on global tech firms, a so-called “Google tax”, which will aim to compel multinationals to pay tax in the countries they operate in.

“Some were holding their breath for an announcement on the UK’s Digital Services Tax, there were even rumours that we might see a delay,” Melissa Geiger, head of international tax and tax policy for KPMG said.

“Instead the chancellor used his speech to reiterate the need for tech giants to pay their fair share of tax. No deferral looks likely and the accompanying written ministerial statement refers to a consultation on the detailed design and implementation.”

Late payments

Large companies taking advantage of smaller ones by taking months to make payments will also face tougher rules. Big firms will have to review and report on their payment practices annually in the first step of a crackdown.

The Federation of Small Businesses (FSB) cheered the move aimed at preventing the “rife and pernicious” practice.

“The UK’s late payment crisis destroys thousands of businesses every year,” said FSB national chairman Mike Cherry.

“The commitment from the chancellor that the business secretary will see this through is welcome, and we are especially pleased that the first measure has been announced – to make a non-executive director responsible for the supply chain through the audit committee of every large business, and to report back through the annual report on their progress.”