Navigating Uncertainty: What Will the Budget Mean for Businesses?

As the chancellor prepares for the second Budget, business leaders are on edge, grappling with the effects of last year’s significant tax hikes, including a £25bn increase in National Insurance and a rise in the minimum wage. With confidence wavering in boardrooms, experts are warning that another round of tax increases may be on the horizon.

Research from Capital Economics predicts a 0.2% drop in GDP due to the Budget’s impact, creating further anxiety for businesses already facing slow growth, as the economy grew only 0.1% in the last quarter. Even so, there are signs that the Bank of England might lower interest rates to stimulate borrowing and spending, with expectations that inflation will decrease next year, possibly aiding business confidence.

One key anticipation is the government’s restraint in new taxes, as emphasized by the CBI head, Rain Newton-Smith, who advocates for stability as the path to growth. Suggestions on business rates include making recent discounts for small businesses permanent or restructuring them to avoid drastic increases, potentially funded by higher rates on larger properties.

The Business Secretary, Peter Kyle, has also initiated pro-business policies, such as lowering electricity costs for thousands of businesses and targeting lending to key sectors. Concerns linger over tax adjustments for banks, which could hamper the government’s growth narrative, as well as the future of windfall taxes on oil and gas profits and the anticipated Employment Rights Bill.

With a mixed outlook, 55% of business leaders report delaying investments until after the Budget, although 43% expect to increase investments following the announcement. Despite hints of cautious optimism, many in the business community remain apprehensive about what new measures may come, especially regarding wage increases and changes to salary sacrifice schemes.

Ultimately, businesses hope for a Budget that conveys support and recognizes their past challenges, leading to a potential collective sigh of relief amidst ongoing economic uncertainty.