Where Did All the Growth Go? Businesses Demand Answers After Budget Disappointment

In a disheartening evaluation of the recent Budget, the Office for Budget Responsibility (OBR) has confirmed that not a single policy will alter the growth forecast for the next five years. This is particularly troubling for a government that has made economic growth its main focus. While the OBR has updated its growth forecast for this year, it has downgraded projections for every subsequent year leading up to 2030.

Businesses, though relieved to avoid drastic measures like the previous £25bn national insurance hike, are questioning where true pro-business initiatives are. Specific sectors such as High Street retail and hospitality have been framed as recipients of special support; however, they face increased costs through rising business rates and labor expenses. Although the government promises lower tax rates for these sectors, the reality is that many will end up with significantly higher rates as Covid-era discounts begin to phase out in April.

The recent 8.5% pay rise for young workers may seem beneficial but could discourage employers from hiring new people, as it follows a 16.3% rise from the previous year. Business leaders worry that these measures may hurt the very individuals they aim to help, resulting in fewer jobs and lower growth. Furthermore, the cap on salary sacrifice arrangements might lead to reduced pension contributions or diminished pay raises, adversely affecting both workers and businesses.

Conversely, one overlooked but potentially impactful measure is the expansion of tax relief schemes for investors in young companies, allowing access to larger investments. The Treasury maintains that the economy is outperforming forecasts aided by substantial public and private investments, claiming that the Budget encapsulates a long-term plan for growth and job creation. Yet, many believe that the government’s capability to instigate growth is severely limited; people genuinely desire a reduction in tax burdens and regulations to foster business prosperity.

Former Bank of England chief economist Andy Haldane remarked that pre-Budget speculation significantly contributed to the absence of growth in the latter half of the year. Ultimately, business leaders like Steve Rigby express hope that the new Budget does not severely impact businesses, a sentiment underscored by the fact that achieving this minimal goal is a stark reminder of the government’s urgent need for economic growth.