AUTUMN BUDGET 2024 – business and insolvency sectors reaction

Chancellor Rachel Reeves has announced the autumn budget for 2024.

Commenting on the announcements James Burgess, Head of Commercial and insolvency expert at Atradius said “Today’s Autumn Budget could be a game-changer for businesses across the UK, marking a pivotal moment for the economy. With Labour’s proposals set to impact retail, hospitality, and leisure businesses, these firms need to stay sharp as we head into 2025.

“As Labour confirms tax hikes of £40 billion, uncertainty looms over National Insurance contributions and small businesses across the UK, which will bear the brunt.

“SMEs, especially, will now have to prepare for the changes to Capital Gains Tax and increased employer National Insurance Contributions, which for many could be a deal breaker.

“In times like these, diversifying supply chains and reinforcing liquidity are essential for absorbing unexpected costs. The ‘domino effect’ of insolvency is real—protecting trade credit agreements with insurance is the smartest move to safeguard your business in 2025.”

Theo Chatha, Chief Financial Officer of Bibby Financial Services said “The new government came into power on a mandate set to support SMEs. But this budget fails to provide them with the support they need to succeed – and will even harm their growth.  

“Although the Employment Allowance did show recognition of the needs of the smallest businesses, an increase in employer national insurance payments still presents a real risk to SMEs. Many are already struggling with high costs and thin margins, so making employment more expensive could result in an immediate cashflow crisis. As a knock-on effect, we could see investment levels, growth ambitions and job creation all damaged as a result. 

“A rise in capital gains tax also discourages the entrepreneurial spirit the UK economy desperately needs. We’ve already seen the consequences of this. According to official figures, more than 1,600 company directors have closed their businesses’ doors since the start of October – by far the highest number of closures this year and more than double the amount for the whole of last October.  

 “With today’s budget, the government has not made good on its promises to SMEs. Looking ahead, it must recognise not just their importance to the economy, but also their fragility. For many SMEs, just a few unexpected or high costs disrupt a precious balance and throw their future into doubt.” 

Dr. Roger Barker, Director of Policy at the Institute of Directors, said “At first blush, there is precious little in the government’s first Budget which offers anything other than short-term pain for the business community. The government has chosen to impose a significant new tax burden on business as a means of achieving an immediate boost to its public sector spending priorities. The risk is that this will exert a negative impact on business confidence, with worrying implications for the economy’s future growth trajectory.

“On the positive side, the government has made changes to its fiscal rules, in order to accommodate borrowing for the purposes of investment, and published a corporate tax roadmap, both of which we called for in our Budget submission. The protection of public spending on R&D and the announcement of various transport infrastructure projects are also welcome. The role of the National Wealth Fund in directing investment towards the industries of the future will hopefully make a positive contribution to the economy’s long-term growth prospects.

“However, after a difficult few years, business leaders will undoubtedly find it hard to look beyond the imminent tax increases set out by the Chancellor, particularly the increases in employers’ National Insurance and capital gains tax. Whilst these broad changes had been largely pre-briefed ahead of the statement, the magnitude of the National Insurance tax rise is greater than expected and further adds to the burden on business.

“Business leaders can only hope that this is a big bang now, to wipe the slate clean, and that there will be no further shocks of this magnitude in the lifetime of this Parliament, enabling business to plan with more confidence.”

Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said “Increasing the employment allowance for small businesses by a record amount is a very welcome move and we’re pleased the Chancellor has heard us loud and clear. More than doubling it, from £5,000 to £10,500, will shield the smallest employers from the jobs tax, therefore is a pro-jobs prioritisation in a tough Budget.

“The decision to protect small businesses from an inflationary hike in business rates – by freezing the small business multiplier – will help small firms with premises across all sectors. Meanwhile, extending business rates relief, albeit at a lower level, for small firms in retail, hospitality and leisure will mitigate a potential cliff-edge tax hike for those in some of the toughest sectors.

“The true test of today’s Budget will be whether small businesses can grow and end the economic stagnation the UK has been stuck in.

“Larger small, and medium-sized, businesses will struggle with the rises on employer national insurance on top of the large costs from the Government’s employment law plans. We’ve been very clear in our warning of the difficulty SMEs will be confronted with in meeting all of these changes at once – and the potential impact on jobs, wages and prices.

“The Budget documents include plans for a small business strategy command paper, which is a welcome signal that ministers appreciate the central role that small businesses play in driving growth and we look forward to working with the Government closely on that.

“Investment in infrastructure is key to future growth, and the Chancellor’s announcement of additional funding for rail projects and fixing potholes is therefore encouraging. Many small firms, meanwhile, will be relieved at the decision not to raise fuel duty. The commitment to prioritise small housebuilders when it comes to housing investment is also welcome.

“Building a business involves a significant element of risk and personal, as well as financial, investment. But for the economy to grow, we need more people to be incentivised to take that leap and, in turn, create jobs, opportunities and prosperity in all communities across the country. The right decision has been taken to retain entrepreneurs’ relief (now branded Business Asset Disposal Relief) up to £1million, which is something we have campaigned hard for. Although the level of relief will gradually reduce over time, resulting in more tax being paid in the future on business sales, we’re pleased to see a differential has been kept.

“Against a challenging backdrop, today’s Budget shows a clear direction in business policy now for the whole of this Parliament to target support at small businesses, rather than big corporates – prioritising everyday entrepreneurs working in local communities in all parts of the country.”