What does the Spring 2023 Budget mean for the British luxury sector?

Yesterday, the Chancellor of the Exchequer, Jeremy Hunt, made his Budget statement to the House of Commons. In this statement he announced the following policy measures:

• To replace the Super-deduction which ends this year, full expensing will be introduced from 1st April 2023 until 31st March 2026 and will be matched by an extension to the 50% first-year allowance to cover the same period.
• A 12-month extension to the 5p cut in fuel duty and no increase in line with inflation.
• An end to the Alcohol Duty freeze in August 2023, seeing increases to duty on wine and spirits.  
• Childcare reforms, to provide 30 hours of childcare a week for one and two year olds.
• A plan to help get more people back to work, including changes to the pensions tax regime - abolishing the lifetime allowance and raising the annual allowance to £60,000.
• An extension to the Energy Price Guarantee at £2,500 until 1st July 2023.
• An extension to the higher rates of the theatre, orchestra and museums and galleries tax reliefs for two years in order to support cultural institutions that are vital to the tourism economy.
• Unfortunately, the Government is pressing ahead with its plans to increase Corporation Tax to 25% and did not announce the return of a Tax-Free Shopping scheme.

He also outlined the Office for Budget Responsibility’s forecasts for the UK economy. The OBR now forecast that the UK will not enter a technical recession this year, with just a -0.2% contraction. This compares to the forecast -1.4% contraction forecast in November. Inflation is forecast to fall from 10.7% to 2.9% by the end of 2023.

Responding to the announcement Walpole’s CEO, Helen Brocklebank, said:

"It is disappointing that the Chancellor missed this opportunity to reintroduce Tax-Free Shopping, and instead pressed ahead with his plans to raise Corporation Tax. However, the introduction of a full expensing system – albeit with caveats – will be some relief to manufacturers eager to invest in the UK. Walpole has been pressing for a replacement to the super-deduction so this is welcome news. The Government must now act quickly to make this permanent, in order to allow businesses to make plans for long-term investment.

"Perhaps the biggest impacts today will be the changes announced to childcare and back to work reforms, which will help employees re-enter the workforce and increase their hours. Of all the Chancellor’s announcements, this will be welcome news to hard-pressed businesses struggling to recruit and retain staff. 

"I am worried by the increases to duty on wine and spirits. The largest increase in wine duty since 1975 will be a blow to British winemaking, which has seen a boom in recent years.

"The extension of rate reliefs for cultural institutions is a positive step, not only for the institutions themselves, but also for the wider tourism sector they support.”

If you have any questions about the Budget, or would like to share your views, please get in contact with the Walpole public policy team by emailing [email protected]

> Picture by Rory Arnold/No 10 Downing Street