Spring Budget 2024: Chancellor focuses on supporting UK investment

27 March 2024

Donkeys are typically slow-moving animals. If you want your donkey to speed up, the two 'traditional' approaches are either to dangle a carrot in front of its nose or apply a stick to its rear. Trying both could leave the rider with no hands on the reins.

Since last year's Mansion House Reforms, it has been apparent that Chancellor Jeremy Hunt believes that getting the nation's savers to invest in Britain’s up-and-coming young companies and industries is the key to his long-term plan to create a prosperous high-jobs/high-wage economy. In the 2024 Spring Budget, he has shown both the carrot and the stick to achieve this.

Among a raft of measures designed to help British companies, we saw £10m given to the Cambridge Biomedical Campus; a £2.5bn Back to Work Plan to help the long-term sick and disabled to fill vacancies in the labour market; £10bn a year to make full expensing permanent; faster planning, faster connection to the electricity grid, and £4.5bn of support for strategic high-growth manufacturing sectors. The stimuli are not only for large companies. The smallest firms will benefit from a rise in the VAT threshold from £85,000 to £90,000, and new finance from rolling the small or medium-sized enterprise (SME) recovery loan scheme into a new growth guarantee scheme.

Carrots like these should deliver lots of highly attractive investment opportunities for savers looking to back Britain through their ISAs and pensions. And if they do deliver, then perhaps we don’t need that stick. But relying on the “build it and they will come” philosophy has always been a risky approach, so the Chancellor is waving his stick at savers too.

Supporting UK Investment

In April, NS&I will launch their British Savings Bond, to be a three-year fixed-interest guaranteed savings account, the proceeds of which will support investment in the UK. We haven’t seen the rate yet and it is pitching into a sector that is both highly competitive and increasingly easy to access since investment platforms have started to list such bank and building society products on platform.

Last week a consultation begun on a new UK ISA, which will allow a further £5,000 a year to be sheltered inside an ISA on top of the current £20,000. The UK ISA looks as if it will be limited to equities of companies listed on UK stock markets and collective funds that invest exclusively in these, although the consultation does ask the question about whether it should allow corporate bonds and gilt holdings as well. We don’t have a launch timetable yet, as the consultation asks providers how long they will need to prepare.

I see this as part of the stick. The existing £20,000 ISA limit has been unchanged since 2017/18, so an uprating to £25,000 seems only natural. Except that if you do want to use the full £25,000 ISA allowance, you will be forced to put at least £5,000 into British companies.

Pensions Investments

Pensions have also had the Chancellor’s stick waved in their direction: workplace defined contribution schemes and local government pension schemes will have to publish the percentage of funds that they invest in UK companies. This figure (an average of 4%) is currently seen by the Chancellor as being much too low. They have been threatened with sanctions, as yet unspecified, if they don’t move in the right direction.

If things work as the Chancellor hopes, then there’s a bright future ahead for those who back British businesses through their savings and pension contributions.

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