Autumn Budget 2024: The Industry Reacts

Helen Dickinson, chief executive of the BRC

Retailers are counting the cost of today’s Budget: over £2.3bn in increases to employer National Insurance contributions; £367m due to the larger-than-expected rise to the National Living Wage; and a £140m hike to next April’s business rates. These costs come into effect from April next year and are on top of other upcoming regulatory costs and an estimated £300-800m of extra costs from the implementation of the Employment Rights Bill.

Retail employs three million people and 2.7 million more across supply chains, driving investment in jobs, communities and, ultimately, economic growth, right across the country. For a low margin industry, today’s Budget will hit hard, with the odds now stacked firmly against growth and investment in the short term. These new costs also risk increasing the prices customers pay at the till.

As the industry prepares for over £2.5bn in new costs in 2025, improvements to the business rates system will not come until 2026. We welcome the recognition that retail, along with hospitality businesses, should pay lower rates. But with the detail still to be worked through, it is unclear whether this will address an imbalance which sees retail, as 5% of the economy, pay 21% of the total business rates bill. In order to stimulate investment, it is vital these changes reduce the overall costs on the industry, rather than simply shifting the burden from one part to another.

Tom Bradshaw, NFU president

This Budget not only threatens family farms but will also make producing food more expensive. This means more cost for farmers who simply cannot absorb it, and it will have to be borne by someone. Farmers are down to the bone and gristle, who is going to carry these costs?

It’s been a bad Budget for farm confidence, which is already at an all-time low. After today farmers, including tenants, have more uncertainty and more worry, not less.

When you look farmers in the eye and make them a promise, keep it. The shameless breaking of those promises on Agricultural Property Relief will snatch away much of the next generation’s ability to carry on producing British food, plan for the future and shepherd the environment.

It’s clear the government does not understand that family farms are not only small farms, and that just because a farm is a valuable asset it doesn’t mean those who work it are wealthy. Let’s not sugar-coat this, every penny the Chancellor saves from this will come directly from the next generation having to break-up their family farm.

This is one of a number of measures in the Budget which make it harder for farmers to stay in business and significantly increase the cost of producing food.

Benjamin Craig, associate director at Ayming:

 
While disappointing the Chancellor made little mention of the R&D tax credit scheme, the stability she has committed to will be hailed as a welcome change by UK businesses. Under the Conservatives, the R&D and innovation landscape suffered from haphazard and inconsistent changes to the system, so Labour’s commitment to long-term planning is a positive sign. Add to this the Government’s Industrial Strategy and the OBR’s new decade-long growth forecasts, and all signals suggest that the Chancellor is effectively laying the foundations for long-term growth.

That said, there remain considerable issues in the current R&D systems that must be addressed at some point. Ultimately, whilst stability is essential, the Chancellor must seriously consider whether the current system is fostering the best environment to harness the spirit of entrepreneurialism that she’s hoping will drive growth in every corner of the economy.

Last month’s International Investment Summit clearly demonstrated the Government’s laser focus on raising the necessary investment to drive growth - but whether the Chancellor can truly change the shape of the UK’s economy will depend on Labour’s ability to effectively channel this investment into innovation and R&D funding. We can only wait and see what detail emerges in the weeks and months ahead.

Joe Nellis, economic advisor at MHA

This Budget is unlikely to stimulate economic growth in the short-term, given the scale of tax increases hitting the corporate sector.

But the economy was already showing modest signs of recovery, and we can expect to see growth heading towards 2% in 2025 – an improvement from the flatlining of recent years.

However, interest rates are likely to fall slower than previously expected as a result of this Budget, although we still expect to see another cut before the end of this year. The scale of public sector expenditure, increases in the minimum wage, and the likelihood that national insurance charges will lead to higher costs of employment, will put some upward pressure on prices.

There is also a danger that these changes in the private sector regarding national insurance and the minimum wage result in job losses, ultimately harming the ‘working people’ the Government had promised to set out to protect.

While the inflation peak of October 2022 was largely caused by external factors, and these have now calmed, inflationary pressures remain in the form of domestic wage growth. This Budget will have done nothing to alleviate these pressures and there is a risk of a continued wage-price spiral. This has been a concern of the Bank of England. As a result, the 2% inflation target is not likely to be met on a sustained basis for a few years.

James Farrell, head of rural consultancy and partner at Knight Frank

The biggest tax raising budget in generations has confirmed our worst fears. Boxed in by her election pledges – to not increase income tax, VAT nor National Insurance contributions for working people – the Chancellor, with little room for manoeuvre, has announced changes that threaten the very fabric of the countryside and the communities that, for generations, have been the custodians of the land that we all rely on for our day-to-day existence. The publication of ‘Land for the Many’ in 2019 set out to “put land at the heart of political debate”. That has certainly been achieved today.

From April 2026, the first £1 million of the value of agricultural properties will be exempt from Inheritance Tax (IHT), but above that threshold, the combined relief available from APR and BPR will drop to 50% of the standard 40% rate of IHT. This means that inheritance tax of 20% will effectively apply on the full value of farms and rural estates above £1 million.

Firstly, on the changes to APR and BPR , removing the relief from assets exceeding the first £1 million and opening landowners and farmers to the full impact of inheritance tax, shows how detached and unsupportive this Government is towards the importance of land for three core imperatives for the UK - smart food production geared to increased food security and better public health, improving the nation’s carbon position through environmentally conscious land management and increasing the nation’s biodiversity through land managers’ interventions. These are all critical to our nation’s resilience in the face of significant global challenges. Pulling the rug from farmers and removing APR and BPR is the worst-case scenario and can only result in long standing family businesses, that have been encouraged to diversify, failing. This is not just significant for owner-occupiers, it has ramifications for tenant farmers too.  The £1m threshold is pretty meaningless given the level of capital employed in farms and other small businesses across the country. Farms and estates will have to sell land, or property, to pay the inheritance tax, threatening all of these critical intents and adding further challenge to many already beleaguered rural communities  

Secondly, the increase in the minimum wage from April 2025, as well as employers’ national insurance contributions will add another unwelcome pressure for rural SMEs and family businesses, especially those employing people for retail, hospitality and horticulture, particularly around harvesting.

With the change to BPR, it is not just farmers and landowners who will be affected, it is all small and medium sized businesses across the country that will bear the brunt of this budget.

There will be a need for a rapid and concerted effort from the leaders in the rural and farming sectors to hold the Government to account on ensuring that the gulf between urban and rural support doesn’t become even wider. Key to this will be helping the government understand the true implications of these changes prior to their introduction in April 2026, developing policy to support the natural capital market to give investors the confidence to finance nature, and to ensure delivery of a rural budget that enables UK land managers to deliver on all of the interwoven asks from their land – food, climate, biodiversity, as well as their underacknowledged social and community contributions. These deliverables have become non-negotiable, and we seem to be a long way from a government that recognises the part it needs to play. 

Paul Askew: chef patron and owner of The Art School in Liverpool

Now we have got a new chancellor and government, with the incoming budget there’s a crucial chance to re-set what is an increasingly dire situation in hospitality. 

Many of us voted for change to bring this new government in. However, the expectation of increased National Insurance contributions for employers only and talk of changing tax thresholds and living wage increases sends alarm bells ringing in the hospitality sector, which desperately need recalibration. 

There’s an ongoing climate of uncertainty with closures of all kinds of hospitality businesses each week – shutting down for good because they can’t make their businesses add up any more. Turnover remains relatively the same broadly speaking for many operators I know both here in Liverpool and around the UK, but the reality is that making this turnover profitable is getting harder each day.

We need an urgent recalibration in tax for hospitality, which generated £54bn in tax receipts in 2022. In Liverpool, the tourism industry – with hospitality forming a huge part – was worth £6.25bn in 2023. For a city with hospitality in its DNA, we need to increase this each year; the question remains how do we here, and across the UK, make this happen?

Because we continue to face an incredibly demanding, draining and difficult set of circumstances. So unless the government really listens, we will see more closures and more redundancies. How many other fresh food-led businesses need to close to make the new government realise that they aren’t allowing the hospitality industry to grow, invest, employ and quite frankly survive?

We voted for change. Now we desperately need it in hospitality. I really hope the chancellor and government are listening.

Image credit: Kirsty O’Connor / Treasury, OGL 3