As the chancellor's announcement for the second Budget nears, business leaders brace themselves for potential changes after last year's significant tax increases. The sector is still recovering from the £25bn National Insurance hike and a considerable increase in the minimum wage, leading to fragile confidence across boardrooms.
Expectations are set for a tax increase which could impact economic growth. Research by Capital Economics suggests the Budget could reduce GDP by 0.2% in 2026, a notable figure given the mere 0.1% growth in the third quarter of this year. However, while the chancellor may extract funds from the economy, the Bank of England is anticipated to lower interest rates, promoting borrowing and spending, which could boost confidence.
Key Points for Businesses
Businesses remain concerned about potential taxation changes. Business rates could see adjustments, particularly for retail, hospitality, and leisure industries which previously benefited from discounts that were reduced. Permanent discounts and revisions to prevent sudden rate spikes for expanding small businesses are on the cards, potentially funded by increased rates for large retail properties.
On Monday, Business Secretary Peter Kyle is scheduled to speak at the CBI conference, announcing potential measures to reduce energy costs for approximately 7,000 businesses and steer the British Business Bank towards key growth sectors.
The anticipated Planning and Infrastructure Bill, which is crucial for removing growth barriers, is another highlight.
Banks face uncertainty over potential tax hikes, conflicting with pro-investment narratives. It's possible that reduced Treasury payments for Bank of England losses might indirectly affect commercial banks. Meanwhile, the oil and gas sector argues against the continuation of 'windfall' taxes, given reduced oil prices, and seeks potential early termination of these taxes due by 2030.
Furthermore, the Employment Rights Bill, set to enhance worker protection, remains a business concern. Rain Newton-Smith, head of the CBI, plans to address these issues, advocating for governmental reassessment of their strategies.