Budget 2021: Manchester business community reacts to Chancellor Rishi Sunak’s announcements

There was a decidedly mixed response to the major spending review in the House of Commons.
Watch more of our videos on Shots! 
and live on Freeview channel 276
Visit Shots! now

Manchester’s business community has given something of a mixed reaction to the Budget delivered by Chancellor of the Exchequer Rishi Sunak.

Mr Sunak stood up in the House of Commons today (Wednesday 27 October) to deliver both his second Budget of the year as well as a Spending Review.

While some of the measures were welcomed by Manchester firms and organisations representing the commercial sector, there was also criticism that some of their issues went unaddressed.

The overall tactics and strategy behind the Government’s financial and economic thinking was also questioned.

A ‘piecemeal agenda’ with key reforms dodged

Overall the Greater Manchester Chamber of Commerce’s reaction was one of disappointment, despite the fact that the run-up to the Budget had seen news of a large investment of £1.07bn in transport in the city-region.

The Chamber said Mr Sunak had failed to see how the Covid-19 pandemic had changed the situation for businesses and react accordingly.

It also said it was sceptical of the way the funding was being handled, with potential recipients having to bid for cash pots.

Subrahmaniam Krishnan-Harihara, head of research at Greater Manchester Chamber of Commerce, said: “The backdrop to today’s Budget and Spending Review was made up of a complicated tangle of labour shortages and supply chain disruption causing recruitment difficulties and serious delays in the delivery and increased cost of materials.

“Together, they present inflationary pressures and put up numerous speed bumps on the path to economic recovery.

“The Chancellor announced today that projects in Bury and Ashton-under-Lyne are amongst 100 projects that will collectively receive £1.7bn of funding from the first round of awards from the Levelling Up Fund.

Subrahmaniam Krishnan-Harihara, Head of Research at Greater Manchester Chamber of CommerceSubrahmaniam Krishnan-Harihara, Head of Research at Greater Manchester Chamber of Commerce
Subrahmaniam Krishnan-Harihara, Head of Research at Greater Manchester Chamber of Commerce

“Although significant, encouraging local authorities to bid - often against one another - for funds is emblematic of the piecemeal approach that has been adopted for the levelling up agenda and is not going to yield any long-term benefits.

“The UK economy has undergone significant structural changes during the pandemic. Strengthening the future of bricks and mortar retail, and the ability of the high street to compete with e-commerce, is directly dependant on reworking the business rates system.

“The 50% discount on business rates for hospitality, leisure and retail will be received by the industry with a sigh of relief but it is disappointing that significant reforms to the business rates system has been put off.

“Although there were some skills related announcements (and we are yet to delve into the details of Budget publications), the Chancellor did not acknowledge the one issue that businesses across sectors have identified as a critical barrier for their smooth operation and expansion: the severe shortage of labour.

“The expectation was that he would address these challenges head on and, at the same time, give wings to the levelling up promise made by the PM.

“Levelling-up needs more than new buses and bid-based grants for projects. It needs vision. It needs a long-term plan.

“Nearly two years after levelling up became the currency of the Conservative manifesto for the 2019 general election, we will be excused for not understanding what it is and how it will be delivered.”

Some progress but ‘the clouds are gathering’

The Federation of Small Businesses (FSB) said that while the Chancellor had made progress on business rates, inflation and tax clouds are gathering for small firms with a tough year ahead for many.

North West regional chair and Manchester businessman Chris Manka said: “This Budget has delivered some measures that should help to arrest the current decline in small business confidence.

“But, against a backdrop of spiralling costs, supply chain disruption and labour shortages, is there enough here to deliver the Government’s vision for a low-tax, high-productivity economy? Probably not. Where inflation and forthcoming tax hikes are concerned, the clouds are gathering.

“It’s good to see the Chancellor embrace our recommendation for business rates reform: changing the system so it stops hitting small firms that invest to make their premises more sustainable with higher bills.

“That said, much more will be needed to support small employers in the months ahead. Our call for an increase in the Employment Allowance to £5,000 would have made a real difference to efforts to increase wages, retain staff and create jobs as we head into the critical festive season.

“Wider rates reform is positive, especially the promise of a substantial discount on bills for the hard-hit retail, leisure and hospitality industries, alongside cancellation of an increase in the rates multiplier.

“Ambitious investment in skill development is much-needed, and should rightly go some way to putting vocational training on a par with academic qualifications.

“If the Office for Budget Responsibility’s (OBR) concerning inflation forecasts come to pass at the same moment when national insurance contributions and the living wage rise significantly, many small firms will be considering their futures – we’ve already lost close to half a million over the last year.

“National insurance contributions serve as a jobs tax, one which threatens to seriously hamper our economic recovery over the coming months if the planned increase to them is left unaddressed.”

Relief for hospitality and some comfort for businesses

Steven Mason, insolvency practitioner and senior manager at Inquesta, said the Budget would give some comfort to certain sectors hard hit by Covid-19 but also left questions about areas businesses desperately want to see changes in.

Mr Mason said: “Businesses will have welcomed the chancellor’s comments that the economy should return to pre-Covid level at the turn of the year, together with the news that the UK is recovering faster than its major competitors.

“Those concerned about rising inflation and an increase in National Insurance contributions, can at least cling on to his commitment to lower taxes by the end of the parliament.

Steven Mason, insolvency practitioner and senior manager at InquestaSteven Mason, insolvency practitioner and senior manager at Inquesta
Steven Mason, insolvency practitioner and senior manager at Inquesta

“Despite saying he wanted ‘to help those businesses hardest hit by the pandemic’, the chancellor chose to retain the heavily-criticised business rates scheme.

“There was, however, a promise to make the system fairer, with a one-year, 50 per cent discount on business rates for those in the hospitality, retail and leisure sectors. Apart from the Covid reliefs, this would be the biggest single-year cut to business rates in 30 years.

“A further lifeline was thrown to the beleaguered hospitality sector, with a planned increase to alcohol duty cancelled.”

‘Long on promises, short on where money will come from’

Adrian Young, a tax partner at accounting and business advisory firm HURST, said: “Today’s Budget announcement by Rishi Sunak was very long on spending promises, but very short on where the money is going to come from.

“He is pinning his hopes on the general economic recovery that we are seeing, and the increase in the tax take that automatically follows.

“Growth figures are undoubtedly better than anticipated at the height of the pandemic, and there were no new tax-raising measures announced, which would in any case have been surprising given the recent tax hikes including the Health and Social Care Levy.

Adrian YoungAdrian Young
Adrian Young

“On the contrary, the Chancellor spent a fair chunk of his air time talking up feel-good tax cuts and rate freezes, particularly to business rates and alcohol duties, as well as positive changes to the Universal Credit taper.

“But all the Chancellor’s enthusiasm doesn’t really disguise the truth that the tax burden remains at its highest for more than a generation and, while the economic recovery remains fragile, it’s going to take some time before this situation improves.”

‘A quiet Budget giving some sectors stability’

One of the more optimistic takes on Mr Sunak’s speech came from Jon Meeten, head of tax for the North at KPMG UK.

Mr Meeten said: “Despite being fuelled by an economy that is growing faster and borrowing less than previous OBR predictions, this was a Budget which recognised the lasting impact of the pandemic and the long road to recovery which many businesses still must make to return to prosperity.

“Businesses in the North West will be relieved that no further significant taxation was announced by the Chancellor following a year of measures being introduced.

“Indeed, some sector targeted tax breaks were unveiled designed to take the UK forward into a new age of optimism.

“Winners on the day include pubs who will benefit from reduced business rates in England and alcohol duties.

“The North West’s thriving local drinks economy which produces some of the UK’s best beer certainly has reasons to be cheerful heading into the festive season.

“Further details are also to be released on a reform to the UK’s R&D tax credit regime which is expected to see the scope extended to include cloud computing and data costs, however this also represents a narrowing of the relief as it is refocused on innovation in the UK.

“Under pressure to reform the business rates system in England, the Chancellor announced a stopgap for some sectors, where firms in the retail, hospitality and leisure sectors will be given a 50 per cent discount on rates for one year and capped at £110k, a move which will be welcomed by operators of pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms.

“The Chancellor also announced measures to boost business investment by limiting additional rates for businesses in England investing in green technology and for improvements to premises.

“As North West businesses continue to play a key role in the pandemic recovery, this quiet budget should give some sectors here the stability and security they need to grow.”

What has the Government said?

Key announcements in the Budget include:

– A £2.2 billion package of Universal Credit reforms to allow claimants to keep more of the benefit if they earn more from work.

– Some £7 billion worth of cuts to business rates following a review into the property tax, with the cancellation of next year’s increase in the rates multiplier and a 50% cut to next year’s rates for most retail, hospitality and leisure businesses.

– A major overhaul of alcohol taxation, including cutting the cost of Champagne and prosecco, which Mr Sunak said are “no longer the preserve of wealthy elites” from 2023.

– Pubs will be helped with a new lower rate of duty on draught products, knocking around 3p off a pint as part of the reforms.

– Previously planned rises in alcohol and fuel duties will also be scrapped.

– A cut in the surcharge levied on bank profits from 8% to 3%.

– Flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower rate of Air Passenger Duty from April 2023.

– Whitehall departments will receive a real terms rise in funding as part of the Spending Review, the Chancellor said, amounting to £150 billion by 2024/25.

Mr Sunak told MPs: “Employment is up. Investment is growing. Public services are improving. The public finances are stabilising. And wages are rising.”

He promised “help for working families with the cost of living”, with the OBR expecting CPI inflation to reach 4.4% but warning it could go further and hit “the highest rate seen in the UK for three decades”.

The Chancellor was given some leeway for greater spending as a result of an improved economic outlook, with the OBR predicting the economy will return to its pre-Covid level at the turn of the year.

Related topics: