Marie Cooper, the owner of CBE+ in Chesterfield, Derbyshire, had big plans to expand her engineering business next year, but those plans have been put on hold due to the increased taxes imposed by Chancellor Rachel Reeves. With an estimated additional £30,000 in national insurance contributions to be paid starting next April, Cooper has had to rethink her hiring strategy for the upcoming year. She mentioned that they may have to forgo hiring two new employees due to these tax increases, which could impact the growth of her business.
The recent budget outlined by Reeves focused on raising taxes on businesses to fund increased state spending, leaving many in the business community feeling the pinch. Shevaun Haviland from the British Chambers of Commerce described it as a “tough budget for business to swallow,” especially with the rise in national insurance contributions for employers. This, coupled with the increase in the national living wage, presents challenges for many firms in terms of investment and recruitment in the short term.
While there were some positive aspects like the doubling of the employment allowance and keeping corporation tax steady, the overall sentiment among business groups is that these tax hikes will make it more costly to hire new employees or provide pay rises. The Confederation of British Industry emphasized that the private sector’s ability to invest is crucial for the government’s growth agenda and that these tax increases could hinder that.
The Office for Budget Responsibility predicted a reduction in business investment by £25bn due to falling profit margins caused by the budget. The increase in the national living wage, along with other policies like employment rights bills, will add to costs for many businesses across different sectors. For example, the British Retail Consortium estimated that retailers alone would face additional costs in Nics, minimum wage, business rates, and employment rights, totaling billions of pounds.
In the hospitality sector, business owners like Roxane Marjoram are feeling the impact of these tax rises, with the rise in business rates being particularly burdensome. Marjoram, who owns multiple pubs and a restaurant, highlighted the challenges that the hospitality industry will face in the coming year. The reduction in business rates relief, although accompanied by a promise not to return rates to pre-pandemic levels, will still result in significant increases in tax bills for businesses like hers.
Overall, while there may be some benefits to improved public services and investments in certain sectors, many medium-sized businesses are feeling the immediate financial strain of these tax rises. The uncertainty around business investment, coupled with increased costs, is leading business owners to reconsider their hiring and expansion plans for the future. As Cooper mentioned, accepting these changes may be necessary, but the repercussions on the business community are something that many will need to navigate in the coming months.