Business leaders have been giving their reaction to this afternoon’s Budget speech by chancellor Rachel Reeves.
And there was little sign of cheer in Lancashire and the North West after she unveiled a massive £40bn tax hike, including a steep hike for employers’ National Insurance contributions.
Roger Phillips, Tax Partner at Lancashire accountants and business advisors PM+M said: “Working people will pay the price for today’s Budget, no matter how much the Treasury dresses it up.
He said: “To a degree, the government had tied their own hands in their manifesto by saying that they wouldn’t increase income tax or NIC for working people.
“The jump in employer’s NIC to 15 per cent from April 2025 is being spun as Labour having not broken their manifesto commitment, as this cost will be borne by business rather than workers.
“However, the announcement that threshold at which it gets paid come down from £9,100 per year to £5,000 did come as surprise and will inflict further pain for employers across the UK.
“By the letter of the law, this ‘spin’ may be true. The cost will be paid by employers. However, when this is combined with the increased cost burden in the form of a national minimum wage increase, these costs will undoubtedly be felt by employees in the future, either through reduced pay rises, or in the worst of cases, the loss of jobs for those where these increased employment costs are unsustainable by businesses.
“The pain is likely to be most felt by those in the already squeezed hospitality and retail sectors despite the announced 40 per cent relief on their business rates.
“The PM intimated that he doesn’t want people to see lower amounts going through people’s payslips and into their bank accounts but, indirectly, it will, no matter how the government dresses this up.”
He added: The government claims that there is ‘no return to austerity’, but with a total rise in taxes of £40bn, this is the largest any chancellor has announced since Norman Lamont in 1993. Time as they say will tell.”
Matthew Johnson, associate partner at Preston based accountants and business advisors WNJ, said: "Keir Starmer warned the Budget was 'going to be tough'. He wasn’t wrong when it comes to the impact on business.
As widely predicted, employers’ National Insurance contributions were high on chancellor Rachel Reeves' target list. And she did not hold back, with measures to raise £25bn a year for government coffers.
"The rise from 13.8 per cent to 15 per cent is high enough but the significant reduction in the threshold at which businesses start paying NI on a workers’ earnings – from £9,100 to £5,000 - delivers a heavy blow to already under pressure employers.
"There was also confirmation that the basic rate of Capital Gains Tax will rise from 10 per cent to 18 per cent, while the higher rate will increase from 20 per cent to 24 per cent.
"The chancellor told the Commons her mission was growth and said: 'The only way to drive economic growth is to invest, invest, invest.'
"However, the tax rises, coupled with increases in the National Living Wage that also came with the Budget, will have many business owners asking themselves if they should or could invest in their growth.
The chancellor has been at pains to stress there would be no tax rises for ‘working people’. The fact is that the measures she has announced will have an impact on them in the real world when it comes to creating jobs and investment by their employers in their futures.
"There was some good news for the hard-pressed retail, hospitality and leisure sectors with a 40 per cent relief on business rates to help the high street. And a cut in the duty on draught alcohol by 1.7 percentage points means 1p off the price of a pint.
"The freeze on fuel duty will also remain in place, which is some comfort for businesses operating transport fleets.
"As with all Budgets, the devil will be in the detail, however, overall, the negatives for business owners would seem to far outweigh the positives. 'Tough' just about sums it up."
Tony Medcalf, Lancashire-based tax partner at national accountancy and advisory firm MHA, said: “It is little surprise that chancellor Rachel Reeves has used the Labour government’s first budget to mark a significant change in approach from her predecessor.
"Her statement focused on outlining how the government will raise £40bn in tax revenues, in part to fund investments in public services and other areas.
“These investments are intended to improve the UK’s long-term growth prospects and the Office for Budget Responsibility (OBR) agrees with this, predicting the UK economy will grow 2% in 2025 and 1.8% in 2026. It’s been said by several commentators in recent weeks this budget would be one with a long-term lens and, while Labour has kept its election mandate not to increase taxes on working people, it appears businesses will bear the initial cost of this intended long-term economic stability.
“The 1.2% increase in employer national insurance contributions (NICs) to 15% and reduction in the NIC threshold came as little surprise but will not be welcomed by those looking to grow a business by investing in their workforce and raising the national minimum wage will also have a knock-on impact on wages across the labour market.
“However, businesses will breathe a sigh of relief at the decision not to make changes to the capital allowances regime which allows 100% tax relief on investments in qualifying plant and machinery until the end of March 2026 as well as the move to extend the 5p cut to fuel duty – good news for industries and supply chains reliant on transport.
“In addition to the taxes on businesses, there were a number of tax changes announced impacting those who are currently growing a business to exit or those who have already sold a business.
“This includes increasing the lower rate of capital gains tax from 10% to 18% and the higher rate from 20% to 24%, impacting the sale of shares and other assets, as well as a tapered increase in the rate of Business Asset Disposal Relief.
“In addition, business owners looking to pass on a trading company to the next generation will need to consider the changes to Inheritance Tax Business Property Relief which could have a significant impact on businesses valued at more than £1m.”
Keith Melling, partner and head of corporate at Preston-based north west law firm Napthens, said: “People change their behaviour and plan for the inevitable change. People who do not have to or cannot sell in the next four years, will not sell (hang on and wait for rates to reduce) . Those who wish to sell, will try to do so before April 2025 when the first rate increase comes into play.
“The media has reported the number of voluntary liquidations of businesses rising above 1600 in October, according to the London Gazette. This is more than double the number recorded over the same period last year and may continue in advance of April 2025.
“People are more mobile than in 1980 (and with the development of technology can stay connected more easily) and move abroad to a lower taxing jurisdiction and sell their assets (provided not UK property) then.”
“This CGT rate increase could mean less sales and so less CGT for the exchequer (as warned by the Treasury themselves) and to the extent that any reliefs remain from CGT, these will become more valuable and heavily scrutinised. Sales to employee-owned trusts which currently receive full relief from CGT have not been changed.”
Keith added: “The Institute for Fiscal Studies has called for serious reform of CGT and not more tweaks whilst the Adam Smith Institute analysis has stated that abolishing CGT could boost the UK economy by £25 billion in the 2024/5 tax year which would fill the “black hole”. Historical evidence has shown that when the CGT rate is lower, the yield is inevitably higher which usually leads/encourages more growth.”
Miranda Barker, chief executive of East Lancashire Chamber of Commerce, said: “We are concerned about the budget’s downward pressure on employment, with increased costs of staff for SMEs across multiple factors including the National Insurance rate and threshold, and minimum wage increases.
"We can only hope that the government’s promise of taxation pain for investment gain comes to fruition.”
Dave Hillan, Tax Partner for Grant Thornton in the North West, said: "Some of the narrative has been foreshadowed but clearly the Autumn Statement can’t all be about black holes and painful decisions – Britain needs to go for growth.
"In the North West, we have a lot of investment potential which aligns with the chancellor’s “invest invest invest” mantra, driven by advancements in technology, infrastructure, and talent development and financial services all retaining enormous potential.
"The North West is also a strategic location as a logistical hub that fulfills an important role within UK Plc. The announcement of the delivery of the Trans-Pennine upgrade to connect York, Leeds, Huddersfield and Manchester will help further support our infrastructure needs.
"News of funding for high-tech industries such as aerospace and engineering alongside fast and reliable broadband for rural areas will also be welcomed by many. However, higher rates of National Insurance for employers and Capital Gains Tax alongside an increased minimum wage are going to be harder for some to navigate. While there was relief for SMEs in the budget, business leaders are going to need to be careful about balancing these developments alongside a changing tax environment moving forward.
“Stimulus can come in many forms but getting Britain building again is one of the fundamentals. The new government has prioritised housing and, in turn, planning reform. Transforming unproductive grey and brownfield land and revamping town centres that have been affected by changing retail habits can certainly unlock potential."
Policy chair of the Federation of Small Businesses (FSB) which is headquartered in Blackpool, Tina McKenzie, said: “Increasing the employment allowance for small businesses by a record amount is a very welcome move and we’re pleased the Chancellor has heard us loud and clear.
"More than doubling it, from £5,000 to £10,500, will shield the smallest employers from the jobs tax, therefore is a pro-jobs prioritisation in a tough Budget.
“The decision to protect small businesses from an inflationary hike in business rates – by freezing the small business multiplier – will help small firms with premises across all sectors.
"Meanwhile, extending business rates relief, albeit at a lower level, for small firms in retail, hospitality and leisure will mitigate a potential cliff-edge tax hike for those in some of the toughest sectors.
“The true test of the Budget will be whether small businesses can grow and end the economic stagnation the UK has been stuck in.
“Larger small, and medium-sized, businesses will struggle with the rises on employer national insurance on top of the large costs from the Government’s employment law plans.
"We’ve been very clear in our warning of the difficulty SMEs will be confronted with in meeting all of these changes at once – and the potential impact on jobs, wages and prices.
“The Budget documents include plans for a small business strategy command paper, which is a welcome signal that ministers appreciate the central role that small businesses play in driving growth and we look forward to working with the Government closely on that.
“Investment in infrastructure is key to future growth, and the Chancellor’s announcement of additional funding for rail projects and fixing potholes is therefore encouraging.
"Many small firms, meanwhile, will be relieved at the decision not to raise fuel duty. The commitment to prioritise small housebuilders when it comes to housing investment is also welcome.
“Building a business involves a significant element of risk and personal, as well as financial, investment. But for the economy to grow, we need more people to be incentivised to take that leap and, in turn, create jobs, opportunities and prosperity in all communities across the country.
"The right decision has been taken to retain entrepreneurs’ relief (now branded Business Asset Disposal Relief) up to £1million, which is something we have campaigned hard for. Although the level of relief will gradually reduce over time, resulting in more tax being paid in the future on business sales, we’re pleased to see a differential has been kept.
“Against a challenging backdrop, the Budget shows a clear direction in business policy now for the whole of this Parliament to target support at small businesses, rather than big corporates - prioritising everyday entrepreneurs working in local communities in all parts of the country.”
Northern Housing Consortium Chief Executive Tracy Harrison said: “We’re pleased that there’s been a strong focus on housing in the Labour Government’s first budget, recognising the importance of a home that everyone can afford.
"There are some good first steps: the £500m top-up to the Affordable Homes Programme will help our members continue to build social homes, and changes to Right to Buy should make it easier to increase the number of council homes available for those that need them.
“The Spending Review in Spring will be critical. The Government must provide longer term investment to build new social homes and unlock brownfield land; make existing homes greener, warmer and safer, including those in the Private Rented Sector, and regenerate communities across the North.
"It is only with long term investment that everyone will have a safe home they can afford.
“The Government is continuing to deepen devolution with more areas set to receive integrated settlements, increasing local control and helping better join up spending.
"This will help make sure investment delivers real change for Northern communities and is something which should be expanded further in coming years.
“We are pleased to see a commitment to the Warm Homes Plan but need further clarity on levels of investment in social housing.
"Investment in the North of £500 million per year for the next five years and £1 billion for the following five years, would kickstart supply chain growth and create thousands of good green jobs.”
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