“Gamble for growth”- Automotive sector reacts to mini-budget

Published:  23 September, 2022

Kwasi Kwarteng’s mini-budget was laid out in Parliament today (Friday 23 September), and garnered a mixed reception from the automotive sector.

With support for businesses on energy costs already announced this week, it was time for the new Chancellor to look at the broader picture. With a view to supporting businesses, the planned Corporation Tax rise was cancelled, with the rate now staying at 19%. The basic rate of income tax will also be 19% from April 2023, a year earlier than planned. It is predicted that the cut will mean 31 million people are £170 a year better off on average. At the same time, the 45% higher tax band is being abolished, with 40% being the single top bracket going forward. The increase in National Insurance contributions made in April is also being revered. Staying on the domestic side, Stamp Duty on property is being cut, with no Stamp Duty for the first £250,000. For first-time buyers the threshold is now £425,000.

Plans to speed up new road, rail and energy infrastructure were also covered, with legislation to reduce impediments, that hold up roadbuilding. With an eye on the EV future, a Local EV Infrastructure Fund and Rapid Charging Fund was also included. The government is aiming for 2.5% growth via the plan. The Chancellor said: “Economic growth isn’t some academic term with no connection to the real world. It means more jobs, higher pay and more money to fund public services, like schools and the NHS. This will not happen overnight but the tax cuts and reforms I’ve announced today – the biggest package in generations – send a clear signal that growth is our priority.

“Cuts to stamp duty will get the housing market moving and support first-time buyers to put down roots. New Investment Zones will bring business investment and release land for new homes in communities across the country. And we’re accelerating new road, rail and energy projects by removing restrictions that have slowed down progress for too long. We want businesses to invest in the UK, we want the brightest and the best to work here and we want better living standards for everyone.”

Specific support
Commenting on what has been announced, LKQ Euro Car Parts CEO Andy Hamilton said: “Many workshops and bodyshops in the UK’s independent aftermarket are facing a cost of doing business crisis, so the biggest news from today’s mini-budget was the energy price cap first announced two weeks ago. The package of tax freezes and cuts unveiled today – from the National Insurance rise reversal, and cut to the basic rate of income tax – will no doubt help too, and ensure consumers have a bit more in their pockets to spend on their vehicles. But I’ll be looking to the budget proper later this autumn for more specific support for small businesses and our sector.

“This includes reform of business rates, where we back the FSB’s call to increase the rateable value threshold to £25,000, and support for garages that need to invest in future skills, such as EV qualifications, be that through grant funding or further tax breaks. These would not only help businesses in the aftermarket to move past the current crisis but allow them to invest in their futures. There’s no doubt that Liz Truss’s government is making a gamble for growth with this mini-budget, a gamble that has to pay off for the sake of our long-term economic growth.”

The measures announced by the Chancellor are just the beginning of what is needed to get many aftermarket businesses through the winter, according to IAAF Chief Executive Mark Field: “We have written to Secretary of State for Business, Energy and Industrial Strategy, Jacob Rees-Mogg, to highlight the critical role the automotive aftermarket plays in keeping vehicles roadworthy, a key factor in allowing businesses across the sector to remain open during the Covid-19 pandemic.

“The role the aftermarket plays will be even more crucial in the coming winter months, so it is imperative that Government support reflects this. Unfortunately, aftermarket businesses will still face high costs despite the relief scheme and the mini budget announced by the Chancellor.”

Encouraging move

On the reduction in National Insurance contributions, NFDA Chief Executive Sue Robinson said: “The reversal of the National Insurance contribution is welcomed by NFDA and its members. By reducing this additional cost to employers and employees, it helps improve automotive retail business’s ability to attract talent and best tackle the staff shortages our industry is currently facing.” On the decision to not go ahead with the planned Corporation Tax rise, she observed: “Scrapping the proposed corporation tax hike is an encouraging move for businesses across the automotive retail sector, helping reduce the tax liabilities of firms during a period of time where finances are stretched. This is a positive move and one which NFDA has urged government to consider in the past.“

On infrastructure funding, she noted: “The removal of excessive red tape for investment in infrastructure around UK is largely encouraging and NFDA is pleased that government has acknowledged the need to support charging infrastructure. Motorists across the UK will benefit from an upgraded road system and will be essential towards speeding up improved infrastructure for the electric revolution.” However, the lack of focus on Business Rate Relief was a disappointment according to Sue: “The NFDA is disappointed there was no mention of an update to the business rates relief which is due to expire in April 2023. This discount has been critical to the recovery of automotive retail businesses. However, with the ongoing conflict in Ukraine and unprecedented cost of living pressures, we urge government to reassure businesses that they will not face big tax rises come early next year.”

While SMMT Chief Executive Mike Hawes broadly welcomed what had been announced, he pointed out there was more to do: “The Chancellor’s Growth Plan opens the door towards an automotive recovery with encouragement for investment and tax cuts designed to rebuild consumer confidence. We look forward to further action in the months ahead to tackle wider, long-term reform to enhance the automotive industry’s international competitiveness, including a review on business rates, tackling long term energy costs and encouraging investment in new skills – enabling the sector to deliver growth in trade, jobs, and decarbonisation.”

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