Autumn Statement - PwC Northern Ireland comments

NI Economic Outlook

Greg Boyd, economist at PwC Northern Ireland, says:

“While the UK is no longer forecast to be in recession this year, the short-term outlook is for a period of low growth - with the OBR cutting its forecasts for the next 5 years. In our own projections, we expect that Northern Ireland will grow more quickly than most other UK regions this year. Households here have been particularly hard hit by recent inflation - due to lower wages than other regions and less flexibility in household budgets, so news that inflation is forecast to fall back to the Bank of England’s 2% target in 2025 will be welcome. 

“The Chancellor offered some relief to households as benefits will be uprated in line with inflation, pensions will be uprated in line with the triple lock and employee National Insurance Contributions will be reduced in January, saving someone on an average salary of £35,000 around £450 a year.

“Supporting the future growth potential for the UK economy relies on improving productivity. Northern Ireland has a persistent productivity gap with the rest of the UK and supply side policies are key to encourage productivity-led growth. Accelerated capital allowances are one step towards this as they will provide more certainty to support business investment.”

Tax implications for businesses

Mari McLarnon, Tax Director for PwC Northern Ireland, said: 

“Confirmation that the SME and large company R&D schemes are to be merged from April 2024 will be met with mixed views by business. On one hand it is a welcome simplification, but there is still much uncertainty on who will be entitled to claim R&D under the new rules. This will undoubtedly result in some significant winners and losers, with the subcontractors hiring skilled R&D staff expected to lose out based on current draft rules. 

“The merger is likely to result in a further reduction in claim value for many SMEs where the credit rate was already nearly halved earlier this year to just over 18% and will fall to 15% for profitable businesses. Today it was announced that the credit will be made slightly higher for loss-making businesses at 16.2% which will bring an additional boost for existing large companies.  

“The expansion of the R&D relief for R&D intensive business will be welcomed by our local life sciences and high tech sectors. The measure lowers the threshold for which businesses can qualify for the relief from 40% to 30% of total expenditure. 

“The Government’s announcement of a consultation on how to further enhance reliefs to support the growth of film and TV production in the UK is welcome given Northern Ireland’s popularity as a filming location.” 

Áine O’Hare, Tax Lead Partner and International Business Lead for PwC Northern Ireland, said:

“The measures that may cause the most significant impact in NI are the changes to National Insurance Contributions, National Living Wage and full expensing.

“The cut to employee National Insurance Contributions three quarters of the way through the tax year is an unusual step that will be welcomed by those who benefit but could cause an administrative headache for payroll operators.

“The announcement on the National Living Wage will be welcome news to workers. Businesses are unlikely to have forecast this level of increase and will need to review their budgets for next year, including on-costs such as employer national insurance and pensions. This is set to impact on our local labour Intensive businesses. 

“The full expensing change being made permanent will be of benefit to many NI businesses, particularly the NI manufacturing industry. This relief provides a significant cash flow benefit and enables businesses to obtain 100% relief in the year of investment on qualifying plant and machinery investments rather than spreading it over a number of years. Making the relief permanent allows more time to plan and will provide much needed certainty on longer term and staged investment plans.”