The UK’s economic recovery is finally putting ‘down roots’ after GDP grew faster than expected in May, says the Confederation of British Industry (CBI).

The UK economy expanded by 0.4% in May, rebounding from zero growth in April, according to the Office for National Statistics (ONS).

The growth figures were helped by a strong performance from retailers and the construction industry, added the ONS.

Ben Jones, CBI Lead Economist, said:

‘The latest data shows that the UK’s economic recovery is starting to put down roots. While growth in May was driven by a rebound in sectors such as retail and construction, which were hit by poor weather earlier in the spring, recent months have seen activity creeping up across a wide range of sectors.

‘The new Labour government will benefit from some economic tailwinds going forward, with consumer confidence rising as lower inflation and strong wage gains support household incomes. However, many firms remain cautious about the near-term outlook.

‘While the outcome of the election will help dispel some of the recent uncertainty, it could take a turning of the interest rate cycle for the recovery to really bed in.

‘The new government’s focus on making growth a priority is welcome. However, to put the economy on a pathway to long-term, sustainable growth, we need to see concrete actions to deliver that vision within the next 100 days.’

Internet links: ONS website CBI website

Chancellor of the Exchequer Rachel Reeves said she was taking difficult decisions after a Treasury spending audit revealed £22 billion of unfunded pledges.

Ms Reeves confirmed that the Autumn Budget will take place on 30 October.

In a statement to Parliament, the Chancellor made a number of announcements but said there would be more to come on tax and spending plans at the Budget.

The Chancellor said that she has inherited a £22 billion hole in the public finances and said urgent work is required to reduce the pressure on finances by £5.5 billion this year and over £8 billion next year.

Ms Reeves announced that the government will cut Winter Fuel Payments to those not in receipt of pension credits or other benefits.

The Chancellor announced a number of immediate savings, including:

• £800 million this year and £1.4 billion next year from scrapping the Rwanda migration partnership and scrapping retrospection of the Illegal Migration Act.
• £70 million this year by cancelling the Investment Opportunity Fund and other small projects.
• £185 million next year from cancelling the Advanced British Standard.
• £785 million next year from stopping unaffordable road and railway schemes.

Ms Reeves also outlined the next steps in delivering tax commitments from Labour’s election manifesto.

This includes ending the VAT tax breaks for private schools from 1 January 2025 to help recruit 6,500 new teachers, as well as replacing the non-domicile regime with a new internationally competitive residence-based regime.

The Chancellor said:

‘This is not the statement I wanted to give today, and these are not the decisions I wanted to make. But they are the right decisions in difficult circumstances.’

Internet link: HM Treasury press release

The first King’s Speech since Labour’s victory in the General Election saw the new government pledge that securing economic growth would be its fundamental mission.

King Charles III delivered the 2024 King’s Speech at the State Opening of Parliament and announced plans to accelerate housebuilding and high-quality infrastructure through planning reform.

In the Speech, the government also pledged to:

• Reform the Apprenticeship Levy.
• Establish publicly owned Great British Energy.
• Bring train operators into public ownership.
• Remove the VAT exemption for private school fees.

Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), said:

‘The government’s clear intention to speed up the planning system for large scale infrastructure can feed that business confidence, if it can be delivered. Measures to increase business resilience, reform of the apprenticeship levy and legislation to support sustainable aviation fuel could also boost the economy.

‘There are still big issues that need to be addressed. Improving our trade relationship with the EU will not be straightforward, and there will need to be detailed consultation with business on the Plan to Make Work Pay.

‘But there is much in today’s speech which shows the voice of business has been heard and that government is introducing measures that benefit firms and help unlock investment.?

‘We want to work in partnership with the government to make this happen and shift the economy out of first gear to get it motoring again.’

Internet links: GOV.UK BCC website

HMRC has launched a digital tool to help businesses estimate what registering for VAT may mean for them.

The VAT Registration Estimator helps to show businesses when their turnover could require them to register for VAT and its effect on profits.

A business must register for VAT if:

• Total VAT taxable turnover for the previous 12 months is more than £90,000.
• Turnover is expected to go over the £90,000 VAT threshold in the next 30 days.
• They are an overseas business not based in the UK and supply goods or services to the UK (or expect to in the next 30 days) – regardless of VAT taxable turnover.

A VAT-registered business must charge VAT on eligible sales and can usually reclaim it on eligible purchases.

Jonathan Athow, HMRC Director General for Customer Strategy and Tax Design, said:

‘We know that the majority of our customers want to get their tax right. We have listened to what businesses have said and the new tool is designed to help them understand VAT registration, including when they might be required to register.’

Internet link: GOV.UK

The UK government is planning a National Wealth Fund to stimulate private sector investment backed by £7.3 billion in funding through the UK Infrastructure Bank (UKIB).

Chancellor Rachel Reeves and Business Secretary Jonathan Reynolds have instructed officials to immediately begin work to create the new National Wealth Fund by bringing together the work of the UK Infrastructure Bank and the British Business Bank to unlock private sector investment to drive growth.

Under the plans, the National Wealth Fund will bring together key institutions and will target investors in a bid to ‘mobilise billions more in private investment and generate a return for taxpayers’.

An additional £7.3 billion of funding will be allocated through the UKIB so investments can start being made immediately focusing on priority sectors, including green and growth industries, and catalysing private investment. This funding is in addition to existing UKIB funding.

The Chancellor said:

‘This new government is getting on with the job of delivering economic growth. I have been clear that there is no time to waste.

‘I have previously committed to establishing a National Wealth Fund. I am now going further by bringing together key institutions.

‘We need to go further and faster if we are to fix the foundations of our economy to rebuild Britain and make every part of our country better off.

‘That is why in less than a week we are establishing a new National Wealth Fund and bringing together the key institutions that will help unlock investment in new and growing industries.

‘Britain is open for business – and the work of change has begun.’

Internet link: GOV.UK