31 Oct 2024

Budget 2024:  Reaction from Greater Birmingham businesses

Bira CEO Andrew Goodacre.jpg

Greater Birmingham Chambers of Commerce members have been reacting to Chancellor Rachel Reeve’s Budget which was announced yesterday.

Here is a selection of comments from business leaders…

Andrew Goodacre, CEO of Bira:

"This is without doubt the worst Budget for independent retailers I have seen in my time representing the sector. The government's actions today show complete disregard for the thousands of hard-working shop owners who form the backbone of our high streets.

"Small retailers, who have already endured years of challenging trading conditions, now face a perfect storm of crippling cost increases.

“Their business rates will more than double as relief drops from 75 per cent to 40 per cent, while they're hit simultaneously with employer National Insurance rising to 15 per cent and a lower threshold of £5,000, down from £9,100.

“Add to this the minimum wage increase to £12.21, and many of our members are telling us they simply cannot survive this onslaught.

"One member has already calculated these changes will increase their cost base by £150,000 next year alone.

"For all the government's rhetoric about supporting small businesses and revitalising high streets, their actions do precisely the opposite.

“These punishing measures will force many shop owners to make heart-breaking decisions about their businesses' future.

"What makes this particularly bitter is that these are family businesses, often built up over generations, run by people who work incredibly long hours to serve their communities.

“They're now being asked to shoulder an impossible burden while trying to compete with online giants who face none of these cost pressures.

"This is clearly an anti-high street Budget. I can only assume that the government is happy for working people to shop online and buy cheap imports.

“This government has shown complete disregard for the local businesses that create jobs and maintain vibrant communities.

"This Budget betrays every independent retailer who has fought to keep their business alive through recent challenges. It's not just disappointing - it's potentially catastrophic for Britain's high streets."

 

John Webber, head of business rates at Colliers:

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John Webber

“The Chancellor’s announcements concerning business rates were desperately disappointing. Despite pre-election promises of business rates reform, nothing of significance was announced.

“There is to be no consultation, just a discussion document, and the measures announced hardly put a sticking plaster over the gaping wound rather bringing in any fundamental reform.

“Far from heading off a cliff edge, the Chancellor’s measures potentially are driving the sector to the wall . By replacing the current 75 per cent discount to business rate bills, with a discount of 40 per cent, those businesses currently eligible for the relief will see their business rates bills actually rise by a massive 140 per cent next year

“Like the government before her, the Chancellor has failed to tackle the business rates issue. There has been no pledge for business rates reform across the board, no attempt to freeze the larger multiplier or to bring it to a sustainable level that businesses can afford, nor to tackle the business rates deserts we see in some parts of the country, nor to reform the creaking appeals system.”

“Far from saving the high street we have a potential disaster looming.”

 

Johnathan Dudley, Crowe’s head of SME Corporates and head of manufacturing:

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Johnathan Dudley

“I didn’t see anything directly to get British businesses investing as an incentive, unless some of these capital projects are shared out amongst the UK supply chain.

“I totally get the need for investment; I totally believe that investment will drive growth - if that growth is kept inside this country.”

“The big concern about stimulating growth is the combination of the Employment Rights Act, the increase in the National Minimum Wage – which, while laudatory, is setting an agenda for all pay settlements next year – and of course the increase in NI employer contributions, will cost every employer money if they are employing more than about nine or ten people.”

 

Ann Tonks, director, Chapter Restaurant:

“There are two big, fundamental problems with the Budget, which will quickly hasten the decline of neighbourhoods and communities whose vibrant heartbeat is already in critical condition.

“Firstly, the burden of taxation placed on SMEs, the lifeblood of our high streets and the economy, has grown exponentially with no relief.

“For those of us who are labour-intensive, low margin businesses, this makes it untenable for many to survive let alone thrive. We are overwhelmed by

  • increase in employer NI, with the killer kick being the lowering of the relief level, bringing so many more employees into the Employer NI bracket.
  • massive increase of NLW (for the higher aged adults it will have risen 37 per cent in 3 years, +56 per cent for people up to 20 years old)
  • unfair business rates on hospitality whose relief has been slashed

“Secondly, the trading environment is severely depressed and nothing announced today will kick start the return of busy high streets.

“Instead, the cost of living for consumers has just got worse, which exacerbates the dire trading environment.

  • the level of personal income tax allowance at which income tax starts has been frozen again
  • people will be paying another +50 per cent on bus fares
  • inflation will rise as a result of businesses trying to recoup the extra tax burden.

“MPs and the government claim to understand the role hospitality and retail play in our communities but in reality, they do not – otherwise this budget would have looked very different.

“There were other taxation decisions the government could have taken to raise funds while not inhibiting economic growth or confidence, but they didn’t take them.

  • Creating a level playing field on VAT between supermarkets and pubs/restaurants.
  • Reforming Business Rates by lowering the multiplier for hospitality & retail
  • Reforming tax on internet shopping

“A restaurant like ours, sourcing produce through local suppliers, training local staff, serving our community contributes directly to the economy of the region. Lively city centres and neighbourhoods with a buzz and thriving commerce matter but you wouldn’t know it from the approach the Chancellor has taken.”

 

Dr Nik Kotecha OBE, chairman of RandalSun Capital Ltd:

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Dr Nik Kotecha OBE

“It is fair to say October 2024’s UK Budget has given cause to the broadest range of responses I have witnessed in many years.

“Those range from concern and frustration about the biggest tax-raising budget in UK political history, to acceptance and a steadfast resolve that the job of work to realign the levers of the public purse are difficult, but necessary.

“The Chancellor’s rallying cry was that the only way to grow the economy is to ‘invest, invest and invest’, which she certainly plans to do – pledging to ‘restore economic stability’ and to ‘rebuild Britian’ by investing tens of billion of pounds on public services – including a £22.6bn increase in day-to-day health budget spending, plus £3.1bn in capital commitments.

“This is very welcome news for our NHS, which is critical for supporting those with poor health, alongside underpinning the future of our economy. But this must also be backed up by significant reforms, which I believe the NHS requires in order to serve future generations, those in greatest need and provide the care that will be called for, for our aging population.

“A 19 per cent increase in spending of £6.7bn to the Department for Education, and pledges of £2.3bn for the Core Schools Budget to ensure hiring of teachers for key subjects, are also very welcome. But again, reforms are needed here too, if the UK is going to actually plug the skills, innovation and productivity gaps we currently experience, against other developed nations around the world.

“However, I have great concerns about the impact of key budget announcements on businesses like the Employers National Insurance rise from 13.8 per cent to 15 per cent, which is forecast to net £25bn, and likely to impact the people companies employ.

“It is likely to be the same for the welcome increase of 6.7 per cent to the National Minimum Wage, which will further impact struggling businesses and sadly, as a likely consequence, limit or reduce the number of people they are able to employ. Sectors such as hospitality, retail and social care will be most affected – and represent an important and significant employer base. 

“But the budget was not all negative for businesses. Key pledges to protect government investments in research and development ‘to unlock…growth industries of the future’ with more than £20bn of funding announced is material.

“From a social perspective, the additional £5bn of government spending, including support to build 1.5 million new homes and an uplift for affordable new homes, is also welcome, as is the commitment by the Government to extend support for school breakfast clubs, to help parents back to work and ‘give young people the opportunities they deserve.”

 

 

Carly Caton, partner specialising in commercial healthcare at UK and Ireland law firm Browne Jacobson:

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Carly Caton

“Any new funding that helps to add capacity will of course be welcomed within the NHS but to prevent this just being a sticking plaster, we must also identify new avenues to generate additional revenue for trusts and their NHS patients.

“The government should actively encourage trusts, backed by funded support programmes, to develop a commercial mindset and explore how to maximise their available resources, while simultaneously improving healthcare services for the general public.

“Increasing private patient activity within NHS hospitals is one of the easiest routes to achieving this.

“Most trusts already do this to some extent with private patient units but these tend to be relatively small, meaning they provide untapped potential in terms of raising additional income to plough back in to NHS services.

“There are numerous ways of expanding these units and it doesn’t necessarily require significant capital investment if a trust is willing to partner with a private provider.

“Partnership structures can extend from commercial agreements to developing some form of physical expansion to estates, and all whilst creating new income streams for NHS patients at no cost to the taxpayer. 

“Many of our decision-makers are all too keen to shout from the rooftops about the NHS being broken but this isn’t necessarily the case – it boasts world-leading assets and expertise that, if harnessed correctly, provide ample opportunities for healthcare to help drive economic growth as opposed to hampering it.”

 

Gary Davison, managing director of Davisons Law:

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Gary Davison

"The government's decision to increase the additional penalty rate on the purchase of buy to let properties by individuals and companies from 3 per cent to 5 per cent  is almost certain to put off many buyers.

"Already, increasingly onerous regulations and the tightening of rules where a landlord seek to evict non-paying or damage causing renters has led to buy to let property owners leaving the market. Now faced with a hefty “buy in” tax rise and a relatively flat market restricting property values on sales, investors are increasingly likely to look elsewhere for returns on their money.

"Properties previously rented which come up for sale are inevitably going to find a restricted buyers market affecting values. As a result, a number of rental properties may end up being sold to single property owners with a consequent reduction in the amount of rental property available.

Those investors leaving the property scene will also face increased CGT on any gains, with a rise from 20 per cent to 24 per cent in another blow to property owners."

 

Jeremy Harris, partner and pensions lawyer at Fieldfisher:

“The Chancellor announced in her budget statement that ‘inherited pensions’ will be subject to Inheritance Tax from April 2027.

“The Autumn 2024 Budget document and pensions inheritance tax Consultation document published today, state that ‘most’ unused pension funds and death benefits from UK registered pension schemes will be included in the value of the deceased member's estate and so will be subject to Inheritance Tax from 6 April 2027.

“Although the Government seem to be most concerned about high net worth individuals using DC pension funds solely for inheritance purposes and not drawing on their pension funds at all in their lifetime, the Budget documents published today state that the Inheritance Tax liability is to apply to UK registered pension schemes in general, whether DC or DB, and to death benefits in general, except only for dependants' scheme pensions and lump sum death benefits paid to a charity.

“The Consultation document includes a list of the types of death benefits which will be subject to Inheritance Tax. That list concludes with a statement that life policy products purchased with pension funds or alongside them as part of a package offered by an employer are outside the scope of the changes in the Consultation document.

“Clarification of this statement would be welcome in view of the breadth of the apparent liability of death benefits to Inheritance Tax which has been announced.

“Today's Consultation document proposes to make pension scheme administrators liable for reporting and paying Inheritance Tax due on unused pension funds and death benefits under UK registered pension schemes.

“Today's announcement of Inheritance Tax on pension scheme death benefits will remove one of the attractive features of UK registered pension schemes from a tax standpoint, albeit that other features still remain such as the tax relief on contributions and the facility for tax free cash at retirement."

 

Joshua Meek, chief impact officer at Unity Trust Bank:

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Joshua Meek

“The Chancellor has announced a Budget focused on driving growth. It’s crucial that SMEs and civil society are supported to achieve and deliver their ambition as the lifeblood of UK economy and backbone of local communities.  

“While the National Living Wage and employer National Insurance contribution changes could present cost challenges for SMEs, measures like the enhanced Employment Allowance and targeted business rates relief may provide some balance.

“The government should consider strengthening guarantee schemes and other mechanisms to improve SMEs’ access to finance.

“This would help ensure they can manage increased costs, while remaining active contributors both to their local communities, and to national priorities like the Net Zero transition.

“The National Wealth Fund is set to mobilise over £70billion of private investment in clean energy. Acting as an ‘impact investor’,  there is great potential for organisations and communities to benefit as we green the UK energy system and this should include lessons from the successes from the UK’s leading social impact investing sector.

“Alongside the announcements today, activities such as the Civil Society Covenant and the retrofit guarantee schemes can ensure we continue to deliver benefits to communities through UK growth.

“The banking sector has a vital role in supporting businesses as they navigate these changes, and our focus is to help socially-driven organisations invest for growth.”

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