It won’t have escaped anyone’s notice that the new government has delivered its first Budget. It contained few surprises as it was very extensively leaked in advance.
The Chancellor was true to her word in that income tax, VAT, and national insurance rates for individuals were not raised, although, of course, indirectly individuals, or ‘working people,’ are likely to be affected by the additional burden put on businesses. And in any case, people running businesses are also ‘working people.’
Rising Costs Hinder Growth
The obvious problem here is that the extra pressure on businesses of the national insurance rise, combined with the increase in the national minimum wage of 6.7% (16.3% for 18–20-year-olds) and the changes to employment rights will likely add up to a serious disincentive to growth.
We have heard already of a company (not in Essex) withdrawing an advert for four vacancies as a result of the Budget announcement. Many other businesses will be thinking about whether they can afford to expand their workforce.
Growth Risks and Challenges
The Treasury has obviously calculated that their approach is a risk worth taking and that any political damage will be limited or temporary and that other changes not announced in the Budget (e.g., in planning, skills, and industrial strategy) will help to deliver growth—but there will be trouble ahead if the economy does not grow, as they have made economic growth their top priority.
There is also the new threat of possible US tariffs being imposed next year by a new American administration; if this happens, British exports to our single largest export market will be hit, further dampening growth.
Seeking Feedback on Impacts
At the Chambers, we are very keen to hear from businesses about the ‘real world’ impacts of the changes announced.
There are some reliefs, including for businesses in retail, hospitality, and leisure, but are they sufficient?
We‘d also like to see more protection generally, for small businesses in particular—those who are most vulnerable to cost pressures.
Southend, like the rest of Essex, is overwhelmingly a small business economy. But we will need hard evidence of any negative impacts if we are to be successful in pushing back and persuading the government to address any negative effects of the Budget.
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