Budget or Bust: What Are Businesses Really Facing This Time?

As the date of the anticipated Budget approaches, business leaders are feeling increasingly anxious. After facing significant tax hikes last year - including a £25 billion National Insurance increase and a rise in minimum wage - many firms are still struggling to regain their footing. The sentiment among company executives has shown alarming signs, raising concerns over what this year’s Budget may bring.

With rising taxes expected, research from Capital Economics warns of a potential 0.2% reduction in GDP by 2026 - a significant impact for an economy that recorded only 0.1% growth in the last quarter. In an effort to counteract these fiscal policies, the Bank of England may lower interest rates, encouraging borrowing and spending which could alleviate some concerns. The chancellor, Rachel Reeves, is also likely to emphasize positive trends such as the decline of inflation in the coming year.

Business leaders, including CBI chief Rain Newton-Smith, are seeking stability and have urged the government to avoid additional surprising tax increases. Instead, a couple of broad tax rises could be preferable to a multitude of smaller, impactful changes. Concerns surrounding business rates are also prevalent, as cuts have previously led to staggering bills for many firms. The chancellor may propose reforms that include making certain discounts permanent or easing the tax burden on smaller businesses.

Moreover, key announcements from Business Secretary Peter Kyle suggest measures aimed at lowering electricity bills for thousands of businesses and enhancing support for specific growth sectors. The potential influence of the Planning and Infrastructure Bill is noted, as it could help dismantle barriers that hinder growth.

As firms express their reluctance to invest without clarity on the Budget, a recent Barclays survey revealed that 55% of business leaders are deferring investment decisions. However, a ray of optimism exists, as 43% anticipate increasing investment post-Budget, indicating potential pent-up demand for growth, even as overall confidence remains delicately poised. The challenge for the chancellor will be to balance the budgetary demands while also providing reassurance to a business community that is eager for stability but wary of more upheaval.