One week on: What the UK Budget 2020 means

Posted On: 18th March 2020

On 11 March 2020 the UK Budget was announced by the Chancellor of the Exchequer, Rishi Sunak, after less than a month in the position. The Budget was one of the most anticipated of recent years, encompassing a budget of true firsts. The first of a new decade, the first Budget under the new Prime Minister, Boris Johnson, the first Budget delivered since the Conservative party was elected into Government in December, Chancellor Sunak’s fist Budget and, of course, the first budget in post-Brexit Britain. The Budget is significant too, in its response to the Coronavirus, which was pronounced a pandemic by the World Health Organization (WHO) later in the same day.

In this developing political, economic and social landscape, BiP Solutions examines the key themes of the Budget by sector one week on from the Budget’s announcement. We outline what these new measures may mean for BiP customers, clients and other stakeholders in public and private sector procurement.

COVID-19 and business rates

The Chancellor was quick to acknowledge that the impact of the coronavirus will damage the UK economy sharply and largely – but temporarily. The risks had already been acknowledged with the Bank of England announcing an emergency cut in interest rates on Budget morning in response to the Coronavirus outbreak. Rates have reduced from 0.75% to 0.25% – the lowest level since the global financial crash in 2008. The Bank has predicted the virus will lead to temporary, but significant, disruptions to supply chains and challenges to cash flow which will be felt most acutely by smaller businesses.

The UK Government Treasury and the Bank of England have clearly co-ordinated their responses to the potentially severe economic effects of Coronavirus with measures in the Budget allowing banks to lend far more easily to support SMEs and other businesses throughout this period. A statement by the Bank of England said: “The reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.”  

It is worth noting that the Bank of England does not cut interest rates lightly – this is a bold move by Mark Carney and his colleagues, as his six and half year term as Governor of the Bank of England comes to an end this week.

Business stability and growth are at the heart of BiP’s mission. We support and encourage businesses of all sizes and specialisms to grow through effective, collaborative and sustainable procurement. These measures implemented in the Budget seem comprehensive and will help businesses that may struggle the most get through a difficult period.

Statutory sick pay 

A significant area of the Budget that was mostly welcomed across opposition parties clarifies some areas of uncertainty around Statutory Sick Pay amid Coronavirus. All individuals who are advised to self-isolate, whether they have presented with symptoms or not, will be given Statutory Sick Pay and can obtain a sick note via NHS 111. In addition, they can claim Statutory Sick Pay from day one of their illness, instead of day four, which was previously confirmed by the Prime Minister.

For businesses with 250 employees or fewer, Statutory Sick Pay will be refunded by the Government for each employee for the full 14 days – a measure to protect smaller businesses from buckling under economic strains. The Budget also allows people to have faster and easier access to benefits, as well as contributory employment and support allowance (ESA) being claimable from day one instead of day eight. However, the budget did not clarify whether these measures would extend to people on zero-hour contracts.

The NHS and public services

Perhaps the most popular headline in the 24 hours after the Budget announcement is the £30 billion of extra funding for the economy, including £12 billion of emergency funds to support jobs, the economy and public services during the Coronavirus outbreak. Chancellor Sunak said the NHS will receive “whatever it needs” throughout the outbreak, although according to Budget allocations this is looking initially to be around £5 billion.

It remains to be seen how the NHS and other public services will cope as Coronavirus cases in the UK rise, but there does seem to be a consensus that all parties and all industry leaders will show a united front to pull together to protect the UK, its people and its economy.

For new and existing suppliers working in healthcare procurement, or who are looking to work in this sector in the future, we are in a historic time which will demand the very best procurement strategies, in preparation and in practice. The NHS and the wider healthcare sector will be looking to suppliers to help the sector respond to the unprecedented demands of Coronavirus. Procurement, more than ever, has an incredibly powerful role to play in bringing buyers, suppliers and other key stakeholders together to produce a lasting positive impact on the communities where we live and work.


Boris Johnson assured the public that this Budget would deliver “an industrial revolution”. However, the much-awaited National Infrastructure Strategy has been delayed until one week after the Budget, despite an earlier announcement that £600 billion would be invested in the UK’s infrastructure by 2025. The Strategy is expected to detail infrastructure funding and projects over the next 30 years, and to play an instrumental role in ‘levelling up’ regional disparities in UK infrastructure projects. The reason cited for the delay is to allow Sunak to refocus the strategy, reflecting the larger spend that has been made available. That said, the Budget had crucial talking points for infrastructure and the developments to come.

Mr Sunak announced an extensive investment in infrastructure of all kinds in the Budget, a total of £170 billion over five years. As well as £1.1 billion to build 70,000 new homes in high demand areas, flood defences in the north of England have been allocated £200 million for repairs and to improve local flood resilience. This doubles the spend on flood defences to £5.2 billion. Strategic and local roads was welcomed. The latter includes a £2.5 billion ‘pothole fund’ and £27 million ring-fenced to build over 4,000 miles of road across Britain. Other announcements included £5 billion to get gigabit-capable broadband into hard to reach areas, as well as investment of over £500 million in mobile phone capability in rural areas, illustrating how essential modern technology is to the economy and people’s lives.

The emphasis on digital transformation in the infrastructure industry, as well as the implementation of further green initiatives – including the Plastic Packaging Tax set at £200 per tonne and £500 million to be spent on charging points for electric vehicles – will mean buyers and suppliers working in infrastructure procurement will need to be more innovative, more sustainable and more collaborative than ever before. The infrastructure and construction industry, which equates to roughly 7% of the UK economy, will take centre stage in procurement and will be a key sector leading the UK into the new decade.  

Looking to the future: R&D

The Budget placed emphasis on looking to the future and the development of new products and services to meet our needs with significant support for research and development. An increase in the R&D expenditure credit will help businesses of all sizes while SME R&D tax relief allows companies to deduct an extra 130 per cent of their qualifying costs from their yearly profit, as well as the normal 100 per cent deduction. It also allows businesses to claim a tax credit if the company is loss-making, worth up to 14.5 per cent of the loss. Overall, the Budget set out plans to increase public R&D investment to £22 billion a year by 2024-25, which will take support for R&D to 0.8% of GDP. This investment is good news for innovation, which in turn feeds into procurement as public sector buyers seek better, more efficient solutions.

The Budget Overall

The Budget has come at an unprecedented time, as leaders across the globe fight the Coronavirus. The Budget is also remarkable in its 2.8% per annum real growth in public service spending. On this rising spend, Paul Johnson of the IFS took to Twitter to state: ‘This is much faster than economic growth. With investment spending rising even faster, something has to give.’

It would not be wrong to say this Budget, the biggest giveaway since 1992, indicates the Government may be stepping away from the austerity and deficit reduction of the past decade to – in Mr Sunak’s words – provide “security today” and “prosperity tomorrow”. The Chancellor also announced a review of the framework underlying the fiscal rules on balancing borrowing and spending. Commentators suggest that this means that the fiscal rules could be relaxed in time for the Autumn Budget, giving the Chancellor more options to borrow to fund future spending. In combination with the Spending Review, due to be completed by July, this suggests that this government is looking to spend more to invest in public services and the UK economy. This, in turn, is likely to create more opportunities for businesses looking to supply to the public sector, which will perhaps go some way to counteract the economic dive caused by Coronavirus.

Despite the economic and social risks associated with the Coronavirus pandemic, the message from Budget 2020 is that this is also a time to prepare for a future of developing projects across a number of industries. The landscape of the UK, from healthcare to infrastructure, to SME support, is full of potential.

BiP Solutions’ Content, Research and Communications Director, Grahame Steed, echoes this sentiment in his statement:  

“This budget demonstrates that public sector investment is firmly back on the agenda: meaning there will be countless opportunities across the supply chain. While the Coronavirus is clearly the number one priority at this point, we anticipate that further investment into the public sector will be needed in future, to restore social and economic activity.” Now is the time for suppliers to engage with this huge, diverse and solutions-hungry market, and benefit from a boost in public spending not seen since 1992.

Stay updated with the evolving Coronavirus situation and other aspects of interest to the public and private sector with BiP Solutions. 

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