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The 2024 Budget: Business Bears the Brunt, but the Future Could Be Better

Written by Bedfordshire Chamber of Commerce | 31 Oct 2024

Labour’s first Budget since 2010, announced yesterday, on 30th October, certainly lived up to the hints the Government had been dropping over the past few weeks – but then any businessperson will understand you don’t find £40 billion in revenue shortfall without taking some pretty drastic measures.

Nonetheless, here at Bedfordshire Chamber of Commerce, we do share the concern, expressed in an announcementreleased by Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), to which we belong.

In this article, we take a brief look at how Chancellor Rachel Reeves has sought to plug the hole in the nation’s finances, what that means for business and individuals, and where there may be more positive developments coming down the pipeline.

Businesses will have to pay out more

Reeves’ increases in employer National Insurance Contributions (they will rise by 1.2 percentage points to 15% of salary from April 2025), coupled with a 6.7% increase in the National Living Wage to £12.21 an hour, will hit many businesses hard.

Harder, in fact, than it may first appear, as the employer NIC threshold will now also be lower, kicking in at salaries of £5,000 and above, rather than £9,100 and above, as used to be the case.

Plus, minimum wage rates for 18 – 20-year-olds will also rise, from £8.60 an hour to £10 – so businesses employing predominantly younger workers could end up getting hit by a double whammy.

All this additional expense risks putting the brakes on recruitment and expansion for many businesses, at least in the short term, which doesn’t bode well for either the jobs market or the wider economy.

Balancing factors

This said, there are a number of signals that the Chancellor has listened to the opinions of business leaders (and to the representations of the BCC) elsewhere in the Budget.

Corporation Tax, for example – always an economic hot potato – will stay static at 25% for profits over £250,000 until the next election, potentially offsetting, to some degree, the effects of the NIC and wage increases mentioned above.

Also, full expensing and R&D relief have both been retained. This means businesses can continue to set the entire cost of eligible equipment and other items against their tax liability, and companies that spend money developing new products, processes or services, or enhancing existing ones, can benefit from tax credits.

A longer-term view

But what’s interesting is the way the Budget has taken a longer-term view on many issues and opportunities, essentially using the promise of a better tomorrow to take the sting out of current cuts.

Infrastructure, for example, will benefit from over £100 billion in increased investment over the next five years – including by £13 billion alone next year, bringing total spending for 2025-26 to £131 billion.

Sector-specific business rates relief also makes sense for longer-term growth, with retail and hospitality businesses - part of the service industry sector that dominates the UK economy – set to receive 40% relief from April 2025 and through 2026.  It’s likely to be a slow burn, but a sustained one.

The Budget’s emphasis on skills and education aligns with the business community's need for a skilled workforce. An increase in funding for further education, alongside the establishment of Skills England and the new Apprenticeship Growth and Skills Levy, shows a commitment to aligning education with market needs. This focus is beneficial for industries facing skill shortages and businesses looking to invest in talent development​.

For sectors like automotive, clean energy, and infrastructure, there’s significant funding for innovation and growth initiatives, especially in green energy projects like carbon capture and hydrogen. This support signals a priority for sectors that contribute to sustainability, creating potential for businesses to tap into new market opportunities while advancing green objectives​

And with an eye to the contribution that small businesses make to the economy when they thrive and become bigger businesses, the Chancellor will also increase the Employment Allowance from £5,000 to £10,500, effectively meaning many smaller businesses won’t pay any employer NIC at all.

Buyer beware…

But the catch with much of this is that it’s in the future tense. Like all Budgets, it sets out what will happen in the future, but that future is dependent on so many other assumptions.

How will our international trade missions fare? How will the UK’s place on the global stage inform its economic influence and reach? How will a job market hampered by skills shortages fill the posts and staff the businesses that infrastructure investment aims to increase and grow?

There’s a lot that’s unanswered – but then if businesses only ever ran with the certainties, they wouldn’t run at all.

For more information on all the measures announced, take a look at Autumn Budget 2024  - and don’t forget, at Bedfordshire Chamber we can connect you to the experts, tools, and resources you need for a successful business.

For more information and advice, please visit www.chamber-business.com, or call our friendly team on 01582 522448.

Topics: business, Budget 2024

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