The Chancellor’s Budget will “dampen business sentiment, job creation and investment” in the West of England, local business leaders have warned.
Rachel Reeves’ statement to Parliament on Wednesday (November 26) included a mix of tax hikes and threshold freezes affecting businesses.
The move is a bid by the Chancellor to plug the black hole in Britain’s finances, but the Budget has received a cool response from the South West business community.
Among the announcements, Reeves confirmed the minimum wage would be increased by 4.1% from April, with 6%-8.5% rise for younger workers. And she also announced a £2,000 cap on salary sacrifice schemes that pay into a pension.
“This is a tax-raising budget from a Chancellor under pressure,” said Phil Smith, managing director of South West chamber Business West.
“Businesses will once again feel squeezed with rising costs across a range of areas.”
Mr Smith said many West Country businesses were “still coming to terms” with the 2024 Budget announcement, which included a hike in employers’ National Insurance contributions.
“Ultimately, this Budget is unlikely to shift the dial when it comes to business confidence, or economic growth,” he said.
Business West, which offers support to companies across the West of England, said it would be consulting members on the range of levies, taxes and reforms announced by the Chancellor.
The organisation said the change to salary sacrifice thresholds was “essentially a business tax in the same spirit as the National Insurance rise” - and would not be welcomed by the business community.
But Mr Smith welcomed the Growth and Skills Levy and Youth Guarantee, which it said would help attract fresh talent into the labour market, and the free apprenticeship training for under-25s.
“This Budget has also now allocated funding to the Industrial Strategy and Spending Review’s commitments, which are welcomed measures to improve transport, housing and infrastructure for our region and beyond,” Mr Smith added.
The Bristol Hoteliers Association also warned over what it described as “a higher-than-expected” wage increase for under-21s and said overall, the Budget had given the hospitality sector “cold comfort” as it heads into winter.
“If anything, times will become even more challenging for us,” said Adam Flint, chair of Bristol Hoteliers Association.
“The Chancellor did reveal that the government would permanently lower business tax rates for more than 750,000 retail, hospitality and leisure properties, to the lowest rate since 1991, which may offer some relief to some venues, but it’s not nearly enough.
“The Budget has somewhat dampened the enthusiasm we were feeling towards the end of the year."
Peter Jones, managing Director of Swindon-based HR Dept, agreed the increase in the National Minimum Wage and National Living Wage could cause difficulties for businesses.
“With a rising wage bill, this may impact their recruitment plans and could potentially drive up unemployment,” he said.
“On the plus side, we work with many hospitality businesses and plans to keep business rates low for high street retail, hospitality and leisure businesses is welcome.”
Nick Rogers, chief executive of Bristol-based Exacta Technologies, which employs nearly 100 people from across the South West and has a turnover nearing £20m, said while maintaining corporation tax rates was welcome, the freeze on national insurance thresholds and increased tax rates on dividends and savings would add pressure to operational costs.
“There’s little in the way of meaningful incentives for small and medium-sized enterprises, and the complexity of new measures makes planning ahead more difficult,” he said.
“We need genuine support for innovation and job creation, not just promises. Overall, it’s a missed opportunity for Ƶ business."
Gemma Broadbent, partner and head of corporate at Wiltshire-based Goughs Solicitors, said further increases in employer costs and the halving of capital gains tax relief for business owners selling to employee ownership trusts reinforced the sense that Government support for Ƶ SMEs is “continuing to erode”.
“The measures announced by the Chancellor send a message that smaller and mid-sized businesses, which form the backbone of the Ƶ economy, are being asked to shoulder a disproportionate share of the fiscal tightening,” she added.
Elsewhere in the South West, Devon Chamber of Commerce welcomed the Budget’s focus on skills and infrastructure, but said "much more" was needed to address the longstanding challenges facing businesses in the county.
"Our county urgently requires investment in transport, digital connectivity and modern infrastructure to support growth, innovation and inward investment," said Helen Wylde-Archibald, the chief executive of Devon Chamber.
"Without this, businesses risk being held back at a time when they need to be moving forward.
"The Devon Chamber will continue to work with Government, regional partners and the business community to ensure our region gets the support it needs to thrive.”
