Growth a priority for government

The Budget  focused on delivering economic stability, growth and investment, but short-term tax raising measures worth £40bn fall primarily on the shoulders of business.

ICAEW has reported that 940,000 employers will pay more NIC in 2025/26. In our conversations with members in businesses across the UK, many have expressed concern with the implications for employment. For example, a member in consumer goods commented that “the incremental cost of ENI is larger than our proposed pay award which will now need to be lowered. We will also reduce the number of new hires over the next 12 months”.

The Chancellor introduced an ‘investment rule’ to reduce net financial debt (public sector net financial liabilities) as a proportion of GDP. This captures both the debt that the government owes and the financial assets expected to generate future returns. ICAEW welcomed this announcement having noted before the Budget that such a move would be the first step to support longer-term investment. The Institute is continuing to urge the government takes a cautious approach so as not to undermine market confidence.

Similarly, ICAEW believes the government’s corporate tax roadmap is a step in the right direction, but the Institute was hoping for a broader view of business taxes.

Industrial strategy

In November, ICAEW responded to the government’s consultation on its proposed industrial strategy. The strategy aims to “create a pro-business environment and support high-potential clusters across the country” – with commitment to making this a UK wide effort. The strategy will focus on eight growth driving sectors: 

• advanced manufacturing,
• clean energy industries,
• creative industries,
• defence,
• digital and technologies,
• financial services,
• life sciences, and
• professional and business services (including accountancy, audit and tax services). 

ICAEW has said that the strategy should promote stability and certainty in government policy, alongside taking a more strategic approach to developing skills. Key to the success of the strategy would be harnessing more reliable data for performance measurement and targeting intervention.

Iain Wright, ICAEW Managing Director, Reputation and Influence, said: “We were delighted to see recognition of the professional and business services sector as one of the areas with the highest growth opportunity for the economy and business, as it is key to the building of a highly-skilled economy.

“We want the UK to be the best place to invest and to start, run and grow a business. Our members have enriched our response through their insights and experiences. We’re pleased to have contributed to this process and stand ready to play our part going forward.”

The consultation closed on 24 November 2024 and a full Strategy including Sector Plans for growth driving areas to be published in the Spring.

Audit reform

ICAEW experts  continue to develop a plan to engage with the Audit Reform and Corporate Governance Bill ahead of draft legislation being published next year. ICAEW’s CEO, Alan Vallance, participated in a ministerial roundtable with professional bodies and audit firms to discuss policy priorities and views on issues including:

• regulatory scope and objectives,
• PIE status,
• enforcement of director duties, and
• audit market competition.

Representatives from ICAEW’s policy teams also met Matilda Curtis, the lead official for this legislation at Department for Business and Trade (DBT), to build on this discussion and earlier roundtable coordinated by the Audit and Assurance Faculty at which the DBT technical lead had participated. 

Skills and opportunity

ICAEW has expressed concerns about the government’s proposals to reform apprenticeship funding, warning that it may lead to adverse consequences for the accountancy profession, and wider UK economy.

There is increasing evidence that high performing apprenticeships are beneficial for the UK economy’s long term growth prospects, especially for professional and business services – one of the eight growth driving sectors identified in the government’s industrial strategy green paper. Data obtained since the introduction of the UK apprenticeship levy highlights its impact in widening access and increasing the supply of highly skilled talent into key UK sectors.

While ICAEW welcomes the introduction of the Growth and Skills Levy, we feel it is important to maintain levy funding for L7 apprenticeships. These apprenticeships have had a positive economic and social impact, including on social mobility within the accountancy sector. ICAEW is participating in discussions with Skills England, Institute for Apprenticeships and Technical Education, member firms and training providers, as part of an informal government consultation on the proposals.

US election implication for trade

ICAEW is closely monitoring policy announcements from the incoming Republican administration in the US, with a particular focus on issues relating to sustainability, corporate reporting and the regulatory framework for reporting and audit. Significant reform has been suggested by some Republican commentators in these areas, but the shape and direction of this will not become clear until next year.