North West business leaders say the region’s cities and businesses still need more from the Government after Rachel Reeves’ long-trailed Budget statement.
The Chancellor raised taxes by £26 billion as she faced forecasts of weaker economic growth, more inflation, and growing unemployment. She also announced the abolition of the two-child benefit cap to ease child poverty, and said she would build herself a bigger buffer against her borrowing rules.
The reaction locally has been mixed, with business leaders at a Liverpool Chamber event attended by BusinessLive saying they were relieved at the lack of surprises but were still uncertain where growth might come from.
Subrahmaniam Krishnan-Harihara, deputy director of research at Greater Manchester Chamber of Commerce, said: “The run up to the Budget was pessimistic because of the expected and now confirmed OBR downgrades to Ƶ economic growth and productivity – which widens the fiscal “black hole” – and chaotic because of the policy “kite flying” and U-turns on some anticipated measures, such as the proposed increase in income tax rates. The result is a Budget that fundamentally fails to deliver what the Ƶ economy needs.
“To start off, the arithmetic does not appear to work. The announced measures raise approximately £26 billion. Simultaneously, spending is expected to increase significantly.
“For example, the Government have taken up direct funding of special needs education from 2028-29 costing up to £6.3 billion annually, while spending on sickness related benefits will be up to £20 billion annually by the end of the decade. Indeed, the OBR has warned that even the increased headroom that the Chancellor expects is still small compared with the uncertain economic forecasts and the smorgasbord approach to raising additional tax revenues.
“Therefore, there is concern that the gap the Chancellor needs to fill may not be filled. That means the Chancellor is counting on very optimistic levels of economic growth or, perhaps, holding back on larger measures for the coming years. Otherwise, the gap remains unfilled.
“Also concerning is the Budget's economic impact. By extending income tax threshold freezes to 2030/31, the Chancellor will strip up to £800 annually from a full-time minimum wage worker's spending power by the end of the decade. Moreover, the fiscal drag could pull an additional 400,000 people into paying income tax and push 600,000 more into higher tax bands.
“At the same time, the National Living Wage rises in April 2026 by 4.1% to £12.77 per hour, while workers between 18 and 20 will get an 8.5% rise to £10.85. In addition to the fact that workers will gain only 80% of that increase – fiscal drag claws back the rest – these rises also put pressure on businesses because the cost of employment goes up.
“This pro-cyclical tightening comes precisely when growth is weakening, and the OBR has downgraded productivity forecasts. These measures could actively suppress consumer spending and the business confidence needed for recovery. The behavioural response to these measures is going to be critical. If there is a reduction in the number of hours worked to offset tax increases or additional business costs, this measure will have an adverse impact on employment.”
“The Budget's development process reveals profound political weakness. The dramatic U-turn on income tax rate rises, which was abandoned after Labour's own deputy leader warned it would "destroy trust in politics" reiterates a pattern across winter fuel payments and disability benefits. This is reactive crisis management, not strategic governing from a government that is hostage to backbench pressure.
Mr Krishnan-Harihara said the run-up to the Budget showed Labour’s “profound political weakness”, thanks to the U-turn on income tax rises.
He added: “Most damagingly, the Budget is silent on the long-term strategy for both growing and rebalancing the Ƶ economy. There is a plethora of plans: industrial strategy, consultation on planning reform, local growth plans and small investments such as an AI zone for Wales. But there is still no substantial regional infrastructure pipeline.
“For example, there is still no confirmation of Northern Powerhouse Rail or a new line from Manchester to Liverpool. The question that many will be left asking is what the Chancellor is meaningfully doing to boost productivity in regions that face persistent deficits relative to London and the South East.
“In summary, while the Chancellor promised ‘fairness and opportunity’, she appears to have delivered a hotchpotch of tax rises, leaving the door open for more tax rises during the rest of this Parliamentary term.
“Fiscal sustainability and economic growth are not opposing objectives - they are mutually reinforcing. A Budget focused solely on raising revenue through stealth taxes, without measures to boost productivity, risks creating a vicious cycle of weak growth requiring further tax rises. If it is the latter, we face a "doom loop". And that would be the worst outcome for the Ƶ economy. “
Liverpool BID chief: ‘There’s not a huge amount that’s positive for our businesses’
Bill Addy, CEO of Liverpool Business Improvement District, said: ““The devil is always in the detail and there needs to be clarity between the actual numbers and the political rhetoric. There’s not a huge amount that’s positive for our businesses within the visitor economy.
“There shouldn't be a barrier for hiring younger workers, and while the training for apprenticeships for under 25s in SMEs is welcome, the cost for hiring remains high. There’s a balance to be drawn between making sure people can afford increasing living costs and have some more in their pocket, with making sure employer costs don’t prevent hiring.
“The problem it’s coming in a storm for business, with high energy costs and, locally, the removal of free parking in the evening, which has hit hospitality in particular.
“Keeping business rates at the lower rate for retail, leisure and hospitality is great but we shouldn’t forget that larger retailers with higher rateable values of over £500k are important places on our bricks and mortar high street offer. Expecting them to pay a lot more could hit high street investment and we need those major brands, like Sports Direct on Church Street, to be those anchor tenants that draw in footfall.”
Mr Addy said he also hoped to see more details on the “levelling up between high streets and online businesses” with customs duty reforms.
He added: “We do need to ask what role this government wants the private sector to play in the economy. The announcement of the introduction of the tourist tax, alongside the suggested departmental cuts that will hit local government spend, means the private sector is essentially plugging the gap of that lack of investment.
“If the tourist tax is to go ahead, then hotels should get the same benefit of 10% VAT as they do in Barcelona!”
And he added: “Growth comes from productivity in the private sector and it’s so critical that the Government creates a positive and thriving environment for businesses. The burden cannot constantly fall on the private sector with no benefit.”
Commitment to devolution welcomed
Ken McPhail, Head of School at Alliance Manchester Business School – which is celebrating its 60th anniversary this year – said: “Today's budget signals a continuation of the fiscal policy approach we saw established last year, with Rachel Reeves announcing a further £26 billion in tax rises by the end of the parliament. What we're seeing is a government doubling down on its strategy of raising taxes to fund public services, with an additional £50 billion in capital spending committed by 2029-30. Supporters of this approach will say that it reflects a government focused on delivering change for left behind regions where there is a real sense of disenfranchisement.
"What is encouraging is the continued commitment to devolution, with £13 billion set aside for regional mayors to help them invest in areas like skills development. In Manchester, our local leaders are well-placed to understand the different skills and talent needs of our businesses and can play an important role in supporting the economic growth we're seeing across the region. The value Greater Manchester brings to the wider Ƶ economy is substantial, so it's welcome news that the government is further empowering local leaders to help build on this momentum."
Tim Heatley, co-founder at Capital&Centric which recently announced a £860m joint venture with Swiss Life and Homes England to deliver over 2,250 homes in “under-invested areas” in England said: “This is a budget that puts real money behind regeneration. For too long Britain’s towns, cities, and regions have had to come begging to Whitehall every time they wanted to get something done.
“Devolving more power and funding to mayoral city regions feels like a proper attempt to put decisions in the hands of local leaders. What matters now is ensuring the money is spent in the places where it’ll have the most impact. It could be transformative for projects like the Littlewoods Project in Liverpool – turning a derelict 1930s landmark into a major TV and film campus – exactly the kind of high-impact scheme these growth funds should support."
Henri Murison, chief executive of the Northern Powerhouse Partnership, said: "The Chancellor has made welcome steps to fiscal devolution, such as the tourism levy, but with council tax surcharge on mansions being retained by the Treasury the debate on access to Mayors and councils having access to wider range of tax instruments, such as national insurance, will only intensify.
“When our only dedicated local tax is topping up Whitehall funds, as local government is still underfunded across the most deprived parts of the country despite the fair funding review, it necessitates a complete reset in the way we fund local and regional government.
“The ability to retain the funds generated by future growth in Leeds is the type of fiscal policy we need - where ambitious cities pursuing growth in the regional and national interest are backed by this government.”
Stephen Cowperthwaite, managing director, Ƶ Regions at property giant Avison Young, said: “This Budget offers a real moment of opportunity for the Ƶ regions, with a foundation for long-term placemaking that could transform our towns and cities.
“This Budget has the potential to reignite regeneration across the Ƶ regions. With billions being invested in transport, New Towns being created, and high streets given vital tax relief, there’s a foundation for long-term placemaking that could transform our towns and cities.
“Take Manchester’s Victoria North – a brownfield site now officially named by the New Towns Taskforce – and the South Bank regeneration in Leeds, with the latter given further funding by the Chancellor in the Budget. These are two examples of vital Northern revival, delivering thousands of homes and bringing employment, culture and commercial space into new communities. When you combine this with the funding announced earlier this year for a £2.1bn mass transit system in West Yorkshire and £2.5bn for Greater Manchester’s trams, you start to see the threads of placemaking coming together.
“But this won’t happen by accident or by sheer goodwill. The government must back its cash with coherent policy, targeted place-based funding and support for business.”
Georgina Lynch, managing director at Manchester-based heritage developer PJ Livesey, said: “Empowering mayoral authorities with greater autonomy and additional funding will help to accelerate housing delivery and provide a major boost to regional economies. The commitment to speed up planning decisions—supported by £48m to recruit more planners—is welcome, if overdue.
“After years of discussion around planning reform, it now just needs to happen. Proposals to review VAT rules to encourage land use for social housing are also encouraging, but reform should go further by including heritage buildings which are the catalyst for unlocking many brownfield sites. The big thing missing in this Budget is meaningful support for first-time buyers. New government incentives would stimulate demand, drive new housing supply and, in turn, lead to more genuinely affordable homes.”
FSB: SMEs need more support
The Federation of Small Businesses (FSB) is calling for more support for SMEs. Its regional spokesman for Greater Manchester, Robert Downes said: “Today’s tax-raising Budget shows the peril of a continuing economic doom loop – we must not be in the same place again next year, with more tax hikes to balance the books due to a lack of economic growth. The tax burden is at a 70-year high, this is the cost of failing to get growth going and trim spending.
“Hikes to dividend taxation mean the Government continues to make investing in your own business one of the least tax-friendly things you can do with your money. Plans to charge employers for supporting their staff pensions are also disappointing and the business rates measures for retail, hospitality and leisure businesses will not help small firms and high streets nearly enough.”
He added: “We need the Government to follow this Budget through with serious, pro-enterprise measures to restore the confidence small businesses need to grow, invest and create jobs.
“While we did see important steps on SME training, apprenticeships and the new jobs guarantee scheme, ministers must now focus on incentivising business support and growth. Otherwise, we’ll be back at square one, stuck in the same rut we were in last year.”
Can Budget meet the scale of the challenge?
Ben Harrison, director of the Lancaster University-based think tank the Work Foundation, said: “It is welcome the Chancellor has attempted to bear down on cost of living pressures facing millions of Ƶ workers while taking action to boost the economy.
“However, OBR forecasts cast doubt on whether the measures in the Budget meet the scale of the challenge. It predicts a delayed reduction in inflation, continued sluggish growth and relatively few economically inactive people moving back into work before the end of this Parliament.
“Commitments to freeze rail fares and to cut family energy bills by an average £150 have the potential to lower the rate of inflation in 2026. But inflation is only forecast to return to the Bank of England’s target of 2% by 2027 – a year later than previously anticipated. Taken together with the decision to freeze tax thresholds for a further three years, the reality is many workers may continue to feel a squeeze to their living standards over the coming period.
“With growth forecasts downgraded, it is also not clear whether Budget measures will address a series of worrying trends in the Ƶ labour market. Unemployment is at a four year high, youth unemployment is rising and health-related economic inactivity remains stubbornly at a near record 2.8 million.
“Yet the OBR suggests that previously announced funding for extra employment support will only support up to 40,000 inactive people back into work by 2029/2030. And while a new ‘Youth Guarantee’ may help more young people to secure a job, there remains a significant risk that interventions will arrive too late to have an impact this Parliament.”
Chris Ross, partner and head of law firm Mills & Reeve in the North West, said: “The intended message today was that the Ƶ will be the best place to start, scale and stay.
“Overall productivity may have been downgraded but Manchester is a real beacon of light. Earlier this month, Oxford Economics data found Greater Manchester’s economic growth is outpacing London. The city and wider region are full of entrepreneurial energy and has been going for growth, and delivering it, despite the macro challenges in the last decade. To continue to scale, innovate and create jobs, North West businesses need to attract the best talent and the right capital to unlock growth.
“On this front, there was good news in the expansion of entrepreneurial investment schemes and the relief for Ƶ stock market listings, with a three-year exemption from stamp duty.
“However, the reduction of capital gains tax relief on disposals to employee ownership trusts to 50%, and a 2% increase to the basic and higher rates of tax on dividends could be viewed as anti-entrepreneurial. Many will welcome the announcements around the call for evidence for how tax can better support entrepreneurs – but progress needs to be made quickly so business owners can plan for the future.
“Afterall, it is clarity and economic stability that will encourage growth and stimulate dealmaking in the region and beyond.”
Dr Geoff Wainwright, CEO of Liverpool-based firm Impact Data Metrics which advises real estate developers and local authorities on growth strategies, said: "With increasing unemployment, slow growth and weak productivity there are few economic reasons to be cheerful.
“As an unashamed advocate for local decision making, it was pleasing to see Government support for the devolved regions with £13 billion to enable place-based interventions in infrastructure, skills and business support. With so much politics at play in this Budget it was disappointing not to see the Government set out a clear plan for growth and tangible measures to restore anaemic business confidence.”
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