Steve Plaskitt, Partner at MHA Tait Walker gives his view on the recent budget that created a Freeport for Teesside and further Government stimulus support for some businesses.
As the UK steadily emerges from Lockdown in coming weeks and the vaccination programme continues to give hope and protection to so many of us, there has already been one shot in the arm for UK businesses. This boost was provided by the Budget on 3 March, which announced a package of measures totalling £65bn into the UK economy with the aim of achieving 10% economic growth in 2021.
In addition to the extension of furlough until September, the continuation of the Business Rates holiday and restart grants for non-essential retail, hospitality, and leisure there was also the Recovery Loan Scheme and tax incentives for company investments: The Recovery Loan Scheme will offer loans of between £25,000 and £10m for those companies that have been adversely impacted by Covid 19 and will replace the successful CBILS loan funding support scheme. The “super deduction” for capital allowances will allow businesses to offset spending on plant and machinery with 130% deductions against taxable income for the next two years. Most eye-catching for the North East region though was the announcement of the new Freeport status for Teesside.
Chancellor Rishi Sunak believes that this Freeport Zone will turbo charge the Teesside economy and bring thousands of jobs to the area as well as an estimated £3.4bn boost. Whilst the concept of freeports has been around before, in the current incarnation the Freeport Zone is an area (a seaport or an airport) where there are massive tax breaks for companies operating within it. It is these tax breaks that will attract international investors and create the thousands of jobs for the supply chain, construction, and service sectors. It is hoped that business investment that otherwise would have been made in mainland Europe will instead come to Teesside, Hartlepool and Darlington. The Teesside Freeport Zone covers many sites across the area, including Teesworks, the Port of Hartlepool, Wilton International, Teesside International Airport, the Port of Middlesbrough, LV Shipping and PD Ports. Teesside’s initial delight was matched by Tyne and Wear’s disappointment at missing out – though in time I believe this will eventually be outweighed by realisation that there will be additional opportunities for the supply chain across both regions. In theory, some existing North East businesses not currently in the Freeport Zone may expand out of their current location in order to take advantage of the benefits offered.
Whilst Rishi Sunak did not help every sector, and the self-employed may continue to feel hardest hit, the Budget has given a welcome boost. However, it was not just a giveaway budget, Corporation Tax is to rise to 25% for bigger companies in 2023 and inevitably further tax rises will be announced in the future.
We should enjoy it whilst we can and hope that a successful vaccine programme will also give the UK, and the North East, a healthy start in its gradual recovery from the Covid lockdown.
