North East business leaders have delivered a mixed response to the Chancellor’s budget, with some hailing it for cementing commitment to regional growth while others say it threatens to leave the Ƶ “stuck in neutral”.
Rachel Reeves’s second Budget – revealed ahead of time in the accidental early publication by the Office for Budget Responsibility – laid out a series of tax rises Ms Reeves is introducing to fill a black hole in the public finances, alongside the launch of measures designed to encourage investment and put money in the pockets of workers.
Speaking in the House of Commons, the Chancellor described the package as “the right choices for a fairer, a stronger and more secure Britain” as she unveiled a £26bn-a-year tax increase. The Chancellor’s measures included a new tax on homes valued over £2m, the end of the two-child benefit limit and a freeze on income tax thresholds.
Stephen Patterson, CEO of Newcastle BID company, which represents the interests of 1,300 businesses in Newcastle city centre said the budget heaps more pressure on the retail and leisure sectors.
He said: “There has been no shot in the arm for businesses or the economy with a budget that takes more from the wages of working people and adds to the financial pressures on businesses.
“With no tax cuts for working people, and a freeze on income tax thresholds for the next three years, there will be less disposable income and salary to spend. This doesn’t bode well for the towns and city centres still reeling from last year’s budget, and there was no respite in today’s announcement, with additional burdens placed on businesses with the increase in the minimum wage.
“This puts extra pressure on sectors like retail and hospitality, which are already struggling under significant pressure. In the Ƶ, on average, one pub closes every day, and closer to home in Newcastle, 16 hospitality venues have closed since the last budget.
“With the last two budgets, the Government has chosen to take over £70bn out of the economy, meaning that times are going to be tight for businesses and finding the money for investment and growth is going to be difficult.”
While saying efforts to boost investment were to be praised, the head of the CBI criticised news of a £2,000 salary sacrifice cap on pensions. The change means salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from national insurance from April 2029.
Rhiannon Bearne, deputy chief executive at the North East Chamber of Commerce, which represents around 2,000 regional businesses, said the Chancellor had attempted "a delicate balancing act" using a series of measures to stabilise the public finances, while welcoming the launch of new funding to unlock opportunities in the region.
She said: "While many of our members will welcome the decision not to introduce further taxes on business, the capping of salary sacrifice on pensions will increase costs for some employers. There will also be understandable caution about the significant tax burden now placed on households and consumers. This shift risks weakening confidence, dampening demand and slowing growth in the months ahead.
“Confirmation of the £13bn of flexible funding devolved for skills, infrastructure and business support to seven Mayoral Strategic Authorities, including the North East Combined Authority, directly delivers our call for devolution to unlock North East growth and productivity.
"We welcome the announcement of £16m for a new STEM Centre in Darlington, funded through the Growth Mission programme. Confirmation of the Creative Places Growth Fund, an AI Growth Zone, and access to a Revolving Growth Fund to improve finance for business within the North East Combined Authority area are all positive developments.
"Alongside the launch of Local Growth Funding for both Tees Valley and the North East Combined Authority, the government has clearly listened to our long-standing calls for deeper devolution to support locally-led growth.
“We also welcome further commitments on planning and development, including funding for the Forth Banks development in Newcastle. The Government’s recognition of capacity issues within the planning system, and the commitment of £48m to address them, represents a significant win for the Chamber.
“On education and skills, employers will welcome the full funding of apprenticeships for under-25s, which should help create more entry points into the labour market and support long-term workforce development across the region.
"Finally, the commitment to consolidate the fiscal rule assessment into a single annual event is a welcome move towards one of our most ambitious asks: for fiscal rules to be applied more flexibly and sensibly. Less speculation about fiscal headroom and more focus on delivery will begin to offer the policy certainty our members need to invest, create jobs and plan for the future with confidence.
“There is cause for guarded optimism, but what matters now is how today's measures play out in practice. The Chamber will continue to champion the interests of North East businesses as the implications become clear.”
CBI chief executive Rain Newton-Smith said the Government must now “double down” on tapping into enterprise trigger economic growth. She said: “The Government’s growth mission is currently stalled. While the Chancellor has succeeded in creating the fiscal headroom she needed, a scattergun approach to tax risks leaving the economy stuck in neutral.
“Adding national insurance to salary sacrifice pension contributions curtails savings and pushes up the cost of employment. Coming on top of the rise to the National Living Wage, increased employment costs make it even more expensive for employers to offer jobs to young people and jobseekers.
“The Government should be commended for protecting capital spending, boosting innovation, sticking with the corporate tax roadmap, and hiring the planning officers business asked for. But business will still rue a missed opportunity to be bold and press on with much needed tax reform, simplification and alignment of incentives to catalyse business investment and job creation.
“With business investment and profitability weaker as a result of these decisions, the Government must now double-down on leveraging the experience and expertise of enterprise to find the step-change in economic growth that has proven elusive. One of the biggest things the government can do right now is get round the table with business to find a landing zone on the Employment Rights Bill that works for everyone.”
Ben Quaintrell, CEO of estate agency group, My Property Box, which has offices in Newcastle, Darlington, and Northallerton, said: “The Budget delivered a mixed picture for the property market. The introduction of a tiered ‘mansion tax’ on homes over £2m won’t affect the vast majority of buyers in the region.
“More importantly, the Chancellor chose not to overhaul Stamp Duty, meaning the current system, including the higher rates for second homes and investment properties, is unchanged. It also offers little in terms of boosting housing supply or addressing affordability challenges, and the longer-term problems facing buyers remain largely unresolved.
“For landlords and investors, the increase in property income tax from 2027 represents a significant additional burden, especially combined with higher mortgage costs and ongoing regulatory changes - which could potentially reduce the availability of in-demand rental homes.
“Overall, this Budget helps at the margins but doesn’t tackle the structural issues facing buyers and renters. Without action on supply, planning reform and long-term investment in housing, the challenges in the market will persist.”
Tim Barrett, chair of Construction Alliance North East (CAN), which represents over 500 regional engineering and construction companies, said calls for more Government support had gone unheard. He said: “As usual, it’s an up and down situation with minimum wage increases and tax freezes meaning tougher conditions for contractors and employees. Also, the ongoing uncertainty around employment status could have been resolved today and could again mean less workers for our industry,
“Despite this, there is still a Government push for housing and infrastructure and for workers to be qualified more quickly, which could bring its own risk. “The industry has called for more support and recognition from the Government. However, this again seems to have gone unheard.
"Cost and compliance burdens for construction firms have risen, but also the stage is set for growth in housing and infrastructure. The sector’s future hinges on whether the government delivers clarity and stable pipelines to offset the financial pressures. So, the outcome, today, seems to mirror what I always say, we won’t see the full impact immediately, so watch this space!”
Millions of electric vehicle drivers will face a 3p-per-mile tax, with the Chancellor saying: “It is only right that our motoring taxes cover EVs via a modest per mile levy, with extra support to keep EV ownership attractive”.
Simon Bailes, managing director of motor dealership group Simon Bailes Peugeot, said: “The Winter Budget leaves us questioning what the Government truly wants. On one hand, retailers are under pressure to meet strict EV-to-ICE sales ratios, yet on the other, measures like the new pay-per-mile tax make electric vehicles less appealing to customers.
"How can we plan effectively when the details are unclear and the long-term strategy feels inconsistent? Encouraging more charging points is welcome, but it’s meaningless if consumer confidence in EVs continues to erode. If the goal is to accelerate the transition to electric, policies need to align, not contradict each other.”
Leah Duffield, partner and head of private client at Newcastle and Teesside law firm Muckle, highlights measures which will simplify future planning. She said: “The announcement that the £1m allowance for the 100% rate of agricultural property relief and business property relief will be transferable between spouses and civil partners, in the same way as the transferrable nil rate band and residence nil rate band, will simplify planning for spouses and civil partners where one party only owns the relievable asset.
“The rumoured cap on lifetime giving and changes to the seven-year rule on gifting did not come to fruition, which will be a relief to private individuals in the process of planning the succession of their wealth.”
Jamie Cooke, co-founder at Newcastle based iamproperty, said: “After a seemingly endless period of speculation that has fuelled uncertainty and stalled decision-making, we finally have some clarity. Yes, the new ‘Mansion Tax’ will have an impact at the very top end, with limited impact in the North East, but the reality is that today’s announcement leaves the majority of agents and home movers no better off.
"What’s far more damaging is the constant fluctuation this speculation has caused, pushing issues up and down the chain, creating hesitancy, and ultimately slowing the market when it can least afford it.
"We have said for a long time that the Ƶ home buying process is fundamentally broken, and the absence of any meaningful attempt to tackle those systemic issues only makes the need for real reform more urgent.”
Dr Arnab Basu, chief executive of Sedgefield based Kromek Group plc, said the Budget sets a "clear and welcome course for defence, reinforcing increased spending and signalling a strong commitment to invest in innovative technologies".
He added: " For SMEs like ours operating in the defence sector, the continued focus on reforms, including efforts to streamline procurement and build on initiatives such as Ƶ Defence Innovation announced previously, are exactly what is needed to help agile, high-tech companies bring new capabilities to the frontline more quickly.
“However, the real impact of these commitments will depend on timely delivery. We are yet to hear when the proposed reforms will be implemented, but if done at pace, and if innovation funding becomes genuinely accessible to smaller firms, it has the potential to be a pivotal moment for the Ƶ’s defence-tech sector.”
Anthony Andreasen, tax director at Gosforth-based RMT Accountants & Business Advisors, said the growth in the number of businesses becoming Employee Ownership Trusts has been a positive move in terms of succession planning and staff incentivisation – but that the tightening of the rules since last year has created more complexities.
He said: “The immediate reduction in the capital gains tax relief on such transactions will make it less of an attractive option for business owners, many of whom will have spent decades investing in and building up their companies, and the hope will be that this change does not have a negative impact in terms of long-term business sustainability.
“The traditional management buyout structure, with more easily-obtained third party funding, could now be a more popular route for succession once again.
“The retention of the inheritance tax measures announced in last year’s Budget is disappointing and means that serious issues still remain for farming businesses and other trading companies which they should be moving urgently to address, although the £1m allowance that was made available can at least now be transferred where appropriate.”
“The extension of National Insurance and income tax thresholds freeze for a further three years beyond 2028 will bring more people into higher tax bands over time, while the two per cent increase on tax rates on dividends, property and savings income will take a further chunk of individuals’ incomes out of their pockets.”
