BUSINESS LIVE: Spring Budget looms; L&G misses profit expectations; Capita to make extra cost savings

Your attention may have been drawn to the Chancellor’s announcements of further cuts to national insurance and the VAT threshold hike on Wednesday.

But, it’s time to delve into some detailed economic forecasts.

Buy-to-let landlords planning to sell up have been handed a tax cut by the Chancellor today.

In the Budget, Jeremy Hunt announced the rate of capital gains tax (CGT) charged on the sale of second homes will be slashed.

Hard-up households will suffer a £12.9billion-a-year rise in council tax by 2029 but still see services cut, the Office for Budget Responsibility (OBR) warned today.

The amount home movers pay in property taxes is set to rocket by £9.4billion in the next five years, after Chancellor Jeremy Hunt decided against cutting stamp duty land tax in today’s Spring Budget.

The Treasury is predicted to collect £12.7billion in property taxes for the 2023-24 financial year, according to Office for Budget Responsibility figures published alongside the Budget.

Simon Dodd, chief executive of Young’s Pubs, comments on the Spring Budget:

The Government has once again kicked the can down the road rather than implement much-needed long-term support for the hospitality sector.

As an industry which contributes £93bn to the UK economy and employs 3.5 million people, our role is critical to the country’s economy and local communities. Yet, many pub operators are still struggling for survival as they grapple with significant cost pressures and an excessive and unfair tax burden.

While we welcome the extension of the alcohol duty freeze, it is simply not enough to secure the long-term future of our sector and the livelihoods of the millions that work within it. To make a real difference, we absolutely need a sensible cut to VAT and reform of business rates.

The Chancellor raised the threshold at which working parents pay the high income child benefit charge to £60,000 in the Spring Budget.

Currently the government claws back child benefit from households where the highest earner has an income above £50,000, and withdraws it completely when they earn over £60,000.

The Chancellor announced in the Budget that National Savings and Investments will unleash new British Savings Bonds next month.

The bonds will have a three-year fixed term and NS&I confirmed that they will be on sale from early April.

The government is extending the windfall tax on oil and gas companies for another year.

Introduced two years ago following a surge in energy prices, the 35 per cent extra tax paid by oil and gas firms on UK-based extraction is now set to expire in 2029.

Today’s Budget was never going to rekindle the nation’s love for a Government which has put us through the equivalent of taxation hell to get the economy through the pandemic – and the financial mayhem that Liz Truss’s disastrous term as prime minister caused.

It didn’t, although Chancellor of the Exchequer Jeremy Hunt was on rather good form as he spelt out a path towards lower taxes – about time too, I hear you say – in between goading ‘two homes’ Angela Rayner, Labour’s Deputy Leader.

A new British Isa will give savers the chance to invest an additional £5,000 a year tax free in UK assets, the Chancellor announced today.

The move to get investors to ‘buy British’ will extend the Isa allowance from the current £20,000, and is expected to appeal to people who already max out their limit and those who want to focus on domestic investments.

Jeremy Hunt announced plans to extend full expensing to cover leased plant and machinery, a move that will likely be praised by many business groups

Mike Randall, CEO of Simply Asset Finance, said: The extension of the full expensing tax scheme to leased assets will also be a very welcome development for small businesses, giving business leaders a much-needed boost when investing in new equipment for their growth – particularly as investment in green assets becomes a greater priority in coming years.

The Chancellor has ‘missed a massive opportunity’ to boost ailing electric car sales in the Spring Budget today, experts and manufacturers say.

Jeremy Hunt’s refusal to respond to industry calls for more incentives to private EV buyers in the form of ‘fair taxes for a fair transition’ will make it increasingly hard for car makers to hit strict targets set out in the Government’s Zero EV (ZEV) Mandate.

Scott Parsons, the UK chief operating officer at Unibail-Rodamco-Westfield:

Today’s Budget is an utter disappointment for the retail and property sectors, with no significant announcement on business rates and no U-turn on tax-free shopping for tourists. These are clear missed opportunities especially in this all-important election year.

It’s deeply frustrating that calls from over 500 sector leaders to halt the tourist tax have been ignored, despite the compelling data which demonstrates the critical importance of tax-free shopping for the UK economy.

What’s more, the existing business rates system places our high streets at a massive disadvantage compared to those in other European cities, with UK retailers shouldering a financial load nearly ten times more than brands on the continent.

Permanently lowering rates is the most meaningful way to support the sustainable, long-term growth of the retail industry and show the world once and for all that the UK is open for investment.

Owen Burn, VAT Director at professional services firm Evelyn Partners, comments on the VAT threshold rising to £90,000:

With many small businesses facing challenging trading conditions in an environment of rising supplier costs and a dent in consumer confidence, increasing the VAT registration threshold to £90,000 will help many entrepreneurs across the UK.

This tax cut means that many existing businesses will not only be able to carry on trading but it will also help encourage a new generation of entrepreneurs to set-up businesses. It is the early stages of setting up a business where entrepreneurs need all the support they can get.

However, we also need to err on the side of caution in that some businesses may opt to manage turnover to remain under the threshold to avoid a potential 20% rise in prices and the additional administrative and financial burden of filing Making Tax Digital compliant VAT returns.

It is therefore unclear what level of growth this marginal rise will deliver for small businesses as a whole at or around the threshold.

Luciano Rispoli, Senior Lecturer in Economics at the University of Surrey, declares her favourite proposals from the budget:

The Chancellor unveiled multiple plans to support a long-term growth plan for the UK economy. It is undoubtedly true that some of these measures will work to sustain economic growth – i.e. incentivising investments in key areas such as AI and creative industries as well as in UK stocks.

But is the 2p decrease in NI contributions is what, in my opinion, will make the biggest difference to earners. This should stimulate employment but more importantly increase disposable income.

In fact, even a tiny increase in disposable income will make a big difference to millions of financially squeezed households who have been struggling due to higher mortgage rates and cost of living.

These are also the consumers with the highest propensity to consume, meaning that the UK economy will likely experience a significant economic boost as a result of these NI contribution cuts.

Christopher Snowdon, head of lifestyle economics at the Institute of Economic Affairs, comments on the vaping duty announcement:

This is a deeply cynical cash grab from the Chancellor. Forget sin taxes, this is a saint tax. Vapers did what the government wanted and gave up smoking. They are now being punished for it.

This is scientifically and economically illiterate. Combined with the ban on disposable vapes, it seems the government is intent on keeping people smoking. Not only will the tax close the price gap between vapes and cigarettes, it will send a message to the public that the health risks are similar.

Since most people in Britain already wrongly believe that vaping is at least as dangerous as smoking, the government’s reckless greed will cost lives. As a former health minister, Mr Hunt should be ashamed.

Kevin Brown, savings specialist at Scottish Friendly, said: While the 2% National Insurance cut might be good news for workers, it’s not helping those above the state pension age or savers or investors that fall into certain tax brackets.

A cut to income tax would have had a bigger impact on those households overall but it seems that would be difficult to fund without swingeing cuts to public services.

Those services are already under pressure and that makes it a tougher sell to the UK electorate, especially in an election year. Therefore, the Chancellor has opted for the cheaper option of the two.

There will be a similar hike in tobacco duty at the same time.

Brian Byrnes, Head of Personal Finance at Moneybox, comments on the proposed British ISA announced today:

While the British ISA may stand to benefit British businesses in time, and we welcome any reform intended to encourage investing, it is unlikely the British ISA will deliver real benefit to the vast majority of retail investors.

The fact is that with a very small minority of investors currently able to max out the current £20,000 tax-free limit, the additional £5,000 allowance will likely solely benefit a small group of wealthier investors who are able to take advantage of it.

To drive a real culture shift towards investing in the UK, more focus needs to be put on empowering everyday consumers to reach their financial goals in life, helping people build positive saving and investing habits earlier in life to build wealth for the future with greater confidence.

Steven Cameron, Pensions Director at Aegon, comments on the introduction of a British ISA:

The new British ISA will appeal to those who currently max out their ISA limits, providing scope for an extra £5k tax-free saving. It will also offer transparency, appealing to those who wish to be certain their investment is staying within the UK.

It will be important the forthcoming consultation creates an unambiguous definition of what qualifies as a UK investment within a ‘British ISA’.

Investors should however be mindful about putting all their ‘eggs in one basket’. Diversifying across different asset types and geographical locations can be an important way of managing investment risk, something which should be emphasised to potential investors.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, comments:

There is likely to be strong interest in the NatWest share sale, which will be the highest profile public share offer since the Royal Mail IPO more than a decade ago.

Giving retail investors the opportunity of a slice of ownership in NatWest is a welcome move, given that they have been left out of previous sales, which have been reserved for institutional investors.

Prospects are looking up for the bank after a tumultuous year when it lost both its CEO and Chair and the valuation has been under some pressure ever since.

But with an attractive entry point, some easing headwinds and strong capital levels, the bank’s current situation is likely to spark enthusiasm.

Chancellor Jeremy Hunt has confirmed in the Spring Budget that fuel duty will remain frozen for a 14th consecutive year – and he will extend the ‘temporary’ 5p-a-litre cut for another 12 months.

Easing some of the burden of higher motoring costs for Britain’s drivers, in his statement to the commons on Wednesday, Mr Hunt said: ”If I did nothing, fuel duty would increase by 13 per cent this month.’

It is the first increase in the threshold for seven years.

Greg Mulholland, the campaign director of Campagin for Pubs recently told This is Money: ‘The cost-of-living crisis is as big a crisis for pubs and publicans as the Covid-19 pandemic, lockdowns and restrictions.’

It was due to rise by 3 per cent in August, but has been extended by another six months. HM Treasury says the measure will benefit 38,000 pubs.

Chancellor Jeremy Hunt today delivers a highly anticipated Spring Budget, faced with pressure to cut taxes and bolster faltering public services.

The Government is keen to woo voters ahead of a looming General Election, but Hunt will be cautious of a stuttering British economy and the constraints of his own fiscal rules.

(PA) – Galliford Try said that it has increased its order book in the last year as it benefited from higher spend from water companies.

The business said that its order book had swelled to £3.7billion at the end of December, compared to £3.5billion a year earlier.

The business reported that revenue rose 20.6% to £819million in the six months to the end of December. Pre-tax profit rose from £11.7million to £15.6million in the same period, Galliford said.

“I am very pleased with the group’s performance in the first half of the financial year,” said chief executive Bill Hocking.

“There is strong momentum in the business and our continued excellent performance is a reflection of our disciplined strategy, committed people and long-established relationships with our supply chain and clients.

“The group has delivered increased revenue and divisional operating margin, as we make accelerated progress towards our strategic objectives, and we will continue to provide long-term sustainable value for our stakeholders.”

Galliford focuses on construction for the public sector or regulated businesses such as the water industry.

It said that its environment unit is benefiting from high levels of spending from its clients in the water sector.

The building arm saw a 12% rise in revenue to £446million during the period, and operating profit rose by £1.3million to £10.6million before amortisation.

Premier Foods shares rose sharply on Wednesday after the Angel Delight owner revealed an agreement to suspend its pension deficit payments from next month.

The deal with RHM Pension Scheme Trustee will offer Premier Foods a £33million increase in free cash flow for the financial year ending in March 2025, the group told shareholders.

The John Lewis Partnership (JLP) is increasing its minimum rates of staff pay by 10 per cent from the beginning of April.

The group, which owns John Lewis department stores and the Waitrose supermarket chain, said minimum hourly rates would rise to £11.55 across the UK, which is above the Government’s national living wage, which will increase by 9.8 per cent to £11.44 an hour.

Legal & General Group earnings slumped last year, despite achieving record new volumes across its insurance divisions.

The financial services giant saw its profits plummet by 42 per cent to £457million in 2023, due partly to costs related to its Modular Homes business and a write-down on its stake in electric vehicle subscription service Onto.

Quilter is reviewing historical services provided to customers amid heightened regulatory scrutiny of how wealth managers charge their clients.

The FTSE 250 firm told investors on Wednesday the review may lead to ‘remedial costs’, but added that it was too early to quantify what those might be.

Food sales at Marks & Spencer are growing twice as fast as they are at Aldi.

In another sign the middle class favourite has got its mojo back, sales over the past 12 weeks were 11.9 per cent higher than a year earlier.

Capita has earmarked an additional £100million of annual spending cuts, as the group’s new boss vowed to boost its competitive edge after swinging to a loss.

The group posted a loss of £106.6million for 2023, down from a £61.4million profit the prior year and ‘reflecting business exits, cost reduction programme expenses and 2023 cyber incident costs’.

Chief executive Adolfo Hernandez told investors on Wednesday he would plough ahead with a ‘rapid reduction’ in costs, following a separate £60million-a-year savings drive announced at the end of 2023.

Fiat has launched a lower-cost hybrid version of its new electric family car as UK bosses warned that slowing demand for EVs had forced their hand.

The new self-charging 600 Hybrid from the Italian brand costs up to £10,000 less than the equivalent all-electric 600e model – and eliminates the range and charging anxiety motorists face due to there being too few public chargers.

A typical Greggs worker will be handed a £700 bonus after it raked in bumper profits and said sales would double by 2026.

Chief executive Roisin Currie said around 25,000 of its 32,000 staff will be rewarded in their March pay packets after ‘another year of rapid growth’.

London-listed stocks have edged higher at the open amid caution in the run-up to the Spring Budget..

Legal & General is down 4 per cent, leading losses on the FTSE 100, after the life insurer missed expectations for 2023 operating profit amid tough market conditions, dashing residual investor hopes of a share buyback.

Precious metal miners are up 1.3 per cent as gold prices hover near record-high levels on hopes of easing interest rates, while rate-sensitive real estate companies and real estate investment trusts have added around 1 per cent each.

British wealth manager Quilter will review historical services provided to customers amid heightened regulatory scrutiny of charging by fund managers.

Quilter said the review may lead to ‘remedial costs’, but that it was too early to quantify what those might be.

‘…we are commencing a review of historical data and practices across our network to determine what, if any, further action may be required,’ the firm said, following a regulatory request for data on servicing from 20 advice firms last month.

The company also reported annual profit above analyst expectations on Wednesday, helped by steady demand from affluent clients for financial advice and portfolio management.

Analysts at JPMorgan welcomed the profit beat in a note, but said the risk of remedial costs could weigh on the stock, citing the experience of rival St James’s Place.

Matt Britzman, equity analyst, Hargreaves Lansdown:

‘Full-year results missed the mark for Legal & General as operating profit came in lower than expected. The investment management arm continues to feel the effects of higher interest rates. Average assets under management were down 12% on the prior year, largely a result of valuations coming under pressure from rate hikes.

‘But Legal & General is a diverse beast, and the retirement business is the biggest driver of operating profit. It’s one of the world’s leading bulk annuity providers and is benefitting from a resurgence in the market. Companies with pension plans can pay L&G a lump sum to take the liabilities off their hands. As rates have moved off the lows seen in recent history, it’s become a more attractive market for both those looking to de-risk and those like L&G in the business of taking on these liabilities.

‘The UK is the most mature global market, but L&G has its eyes set further afield. Activity in overseas markets like the US, Canada and the Netherlands is increasing. Including the UK, there’s around $6trn of pensions liabilities floating about, with the percentage transferred to insurers barely touching double digits. That gives plenty of scope for L&G to keep growing.

‘Some may have hoped for a few more details from the new CEO on his strategy, but investors will have to wait until the announced capital market day in June for more details.’

Outsourcing giant Capita expects to make an additional cost saving of £100million a year by mid-2025, adding to planned spending cuts announced in November.

The group has already outlined plans to cut £60million a year starting at the beginning of 2024, with around 900 ‘indirect support function and overhead roles’ affected.

But Capita said it has now identified ‘further material efficiency improvements which are essential to ensuring our competitive position in the market’.

As a result it will this year ‘be taking steps to realise a further £100million of annualised cost savings by mid 2025, which will be partially reinvested in growth’.

Boss Adolfo Hernandez said:

‘We have yet to deliver the operational excellence that will enable us to create the right platform for future growth or achieve our full potential for the benefit of shareholders.

‘Looking forward, we will focus on precision in execution, co-creating solutions with clients and accelerating the use of technology and leveraging our technology partnerships to drive improvement in our operating and financial performance.

‘We need to deliver a rapid reduction in our cost base and are on track to deliver the net £60m annualised cost savings, from Q1 2024 as announced in November. Today we are announcing further material efficiency improvements of £100m to improve our competitive position.’

Legal & General profits missed analyst forecasts in 2023 as the British insurer faced ‘challenging’ market conditions, with its investment management business suffering a drop in earnings of almost a fifth.

Group operating profit came in at £1.75billion for the year, compared to expectations of £1.67billion.

Legal & General Investment Management, which is one of the UK’s biggest investors, posted a 19 per cent fall in operating profits to £274million as its assests under management fell 3 per cent to £1.16trillion.

Chief executive Antonio Simoes said: ‘We are on course to achieve our five-year targets, and demonstrated resilience in challenging markets.’

The economy has turned a corner.

That has been Jeremy Hunt’s mantra as Britain emerges from a downturn – and it is one that is likely to be repeated in today’s Budget.

Labour’s accusation, however, is that the Tories have crashed the economy.

In truth, Britain’s resilience has proved the most doom-laden forecasts wrong. Yet growth – at just 0.1 per cent in 2023 – has been nothing to shout about.