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Paul Gilmour, finance director of Morson Group, reflects on the Chancellor’s fiscal statement and its impact on the recruitment sector.
“Following the leadership election campaign and recent media interviews dropping heavy hints of tax cuts, we were expecting some reverses in the “fiscal event” statement; however, the outcome was more radical than most thought!
“What we heard was substantial changes to the tax system and measures that seek to boost investment, drive growth, unleash the potential of key sectors and enable businesses to employ the skilled people they need to support those goals.
“The thorny issue of government borrowing and the cost of the measures announced are significant and warrant their own discussion, of course. However, there is much positive news for the commercial sectors across a wide array of industries in these announcements. While much of the focus for the media has understandably been on the cost of living crisis for families, and it is good to see that addressed, the fiscal statement also embraced measures designed to engage business and encourage investment.
“Critically and perhaps most surprisingly for the recruitment sector, was the steps to simplify IR35 rules and the promise to repeal the 2017 and 2021 reforms, which the Chancellor correctly stated have added significant costs and complexity for businesses of all sizes and their workforces. This is a welcome step to enable the contracting sector to thrive and make it more efficient and productive to engage the right workforce at the right time, and recognises the flexibility and drive of the great UK workforce. However, as the Chancellor explained, the government will “continue to keep compliance closely under review”, a comment which must be analysed and assessed with further detail to effectively support clients, contractors and our wider supply chain in navigating the new IR35 landscape. We hope to see a clear roadmap for reversing the current rules, as contractors operating via a personal service company will once again be responsible for determining their IR35 status come April 2023.
“Cuts to Corporation Tax and the well-trailed and immediate U-turn on National Insurance rises will encourage businesses to engage staff and to enable investment in growth and skills. The Apprenticeship Levy might be an area that can also be considered in due course to assess its application and scope.
“Meanwhile, the announcements about boosting growth by funding infrastructure projects and making it easier for them to get off the ground is great news for the UK’s growth potential. However, it presents recruitment and skills challenges in sectors already struggling to attract the right talent. At Morson, we have established programmes in place to attract talent into technical disciplines, providing training and implementing stretch recruitment strategies to leverage transferable skills. As the Chancellor pointed out, the UK currently has more job vacancies than unemployed people, so these types of initiatives need to be embedded in people strategies across the supply chain, and a commitment to inclusion and diversity will be integral to those aims. The Chancellor alluded to forthcoming policy announcements in a number of areas, including childcare, immigration and encouraging older workers, and we need to see some creative thinking in these areas to help employers access the skills they need to achieve the government’s ambitious vision for growth.
“The announcement about new investment zones also has the potential to add an interesting new dynamic to the recruitment market. We may see strategic moves for businesses into areas where attractive fiscal policies and skills both play a part in creating a new industrial map of the UK. At Morson, our skills mapping will help clients at a strategic level as they consider the potential benefits and risks of the new investment zones as this policy becomes clearer.
“The headlines going into this fiscal statement were all about fuel costs – for homes and businesses – and those announcements are certainly significant for the commercial world. But there was so much more here that will affect businesses across a wide range of sectors and demand a rethink of people strategies, both for companies and for their recruitment partners.
“As alluded to earlier, the devil may be in the detail to many of these announcements and there will, of course, be more to follow, for example, with respects to the EU Law (Revocation and Reform) Bill, which may lead to a review of legislation governing working time, agency workers, part-time workers and more. As always, we’ll continue to keep our feeds up to date with expert insight and commentary regarding the latest changes.”