Chancellor Rachel Reeves delivers her latest Budget in which she claims to make ‘fair and necessary choices’ but what do Liverpool city region businesses make of her announcements. Tony McDonough reports
On the eve of Rachel Reeves’ second Budget of Chancellor there was some cheer in Liverpool city region on her green light for regional mayors to introduce a ‘tourist tax’.
Liverpool city region Mayor Steve Rotheram called the policy a “game-changer’ that will raise tens of millions of pounds to be reinvested into the visitor economy which is already worth more than £6bn to Merseyside each year.
However, by the time the Chancellor sat down after delivering her Budget speech on Wednesday, business people across the city region were left a little underwhelmed. This didn’t feel, at first, like a business-friendly Budget.
While there was no repeat of last year’s shock of the rises in National Insurance Contributions there were measures that caused a degree of concern among some business owners and executives.
She announced that tax paid on dividends to shareholders would rise by two percentage points. Traditionally dividends are taxed more lightly than wages to incentivise risk among entrepreneurs. It is feared narrowing that gap could hit investment.
The national living wage will rise by 4.1% to £12.71 an hour for those aged 21 and over.The national minimum wage rate for 18 to 20-year-olds will increase by 8.5% to £10.85 an hour. The national minimum wage for 16 to 17-year-olds and those on apprenticeships will increase by 6% to £8 an hour.
While many business owners are supportive of the minimum wage, there is a feeling that if it is pushed too high too quickly then it may deter businesses from creating new jobs in what is already a tough economic environment.
However, the Chancellor did make it easier for employers to take on and train young people with a new Youth Guarantee that offers £820m towards trying to guarantee every young person a place in college, an apprenticeship or personalised job support.
There was also some help for the beleaguered hospitality sector in the form of a rates reduction for around 750,000 small businesses. Will it be enough?
Liverpool Chamber of Commerce chief executive Paul Cherpeau said it was “difficult to escape the obvious lack of an overall vision for businesses”.
He added: “This was a light-touch announcement which may have led to a moderate sense of stability, but will it be enough to make businesses feel confident to move forward and unlock decisions?
“Growth was mentioned widely, but there was little detail around what will be done and when.
“Free apprentice training for under-25s appears to be a progressive move to help SMEs to support young careers, aligning with our work on the Local Skills Improvement Plan, and support for Enterprise Investment Schemes will be welcome for start-ups and scale-ups.
“Businesses will certainly be relieved to know there isn’t another fiscal event until next autumn.”
Gregory Abrams, founder of Liverpool law firm Gregory Abrams Davidson, told LBN the Chancellor’s reduction in business rates for hospitality and retail businesses was much-needed. It will be funded by an increase on premises worth more than £500,000, such as warehouses used by online retailers.
“Liverpool city region’s hospitality sector has had a torrid time,” said Gregory. “Costs have risen while consumers have been tightening their belts. So right now they need all the help they can get.
“Our high street outlets are facing the biggest challenge since the pandemic so this measure won’t solve their problems but it will give some respite.
“The Chancellor’s decision to allow Steve Rotheram to introduce a tourism levy is an interesting one. Of course, the Liverpool Accommodation BID have already introduced a £2-a-night charge for overnight stays from this summer.
“This new levy will cover the whole of the city region and will hopefully raise millions to support our visitor economy. I was around to see the renaissance of Mathew Street in Liverpool and our headquarters is still based there.
“I see every day how many visitors come to the Cavern Quarter from all over the world every day. Tourism is big business for Liverpool city region and if we can raise millions more to improve our offer then that is to be welcomed.”
Marc d’Abbadie from the Liverpool-based SME funder River Capital, said: “What Liverpool city region, and the UK, needs now, more than ever, is growth. Indeed, the Government has rightly identified growth as its number one priority.
“Businesses, like the ones we support, are the engines that deliver that growth.
“The Chancellor faced some difficult choices. The overall package is one that asks business to contribute more, in a context where fiscal drag is likely to reduce overall consumer demand.
“In particular, the reduction of the Writing-Down Allowances as well as the increase in the National Minimum Wage and the National Living Wage will increase costs for many firms. Investors and owners are also being asked to contribute more, through a two-percentage point increase on the dividend tax.
“Accordingly, SMEs will be watching closely for signs of a more supportive environment as implementation unfolds, to allow them to continue to be the engines of growth.”
Greg Johnson, chief executive of Bootle window and door manufacture Warwick North West, said: “We often talk about whether a Budget is business-friendly. First impression of this Budget is that it really isn’t.
“As well as the extra tax on dividends, which will impact how entrepreneurs assess risk, businesses are also having to grapple with upcoming rises in the minimum wage.
“I’m not against the minimum wage in principle but it is also important to understand that each time it goes up, especially if the rise exceeds inflation, that is a significant extra cost for any employer.
“People are our best asset, but they are also our biggest cost. At a time when other costs are going up across the board the Chancellor needs to be careful that these rises don’t actually end up leading to fewer jobs.”
Overall, Greg was underwhelmed with the Budget, adding: “I read this week how Budgets in recent years have seen lots of smaller measures but fewer big ideas of the kind we saw from Chancellors such as Gordon Brown. That really hit home today.
“Where is the vision? It feels like the UK economy is drifting and there is a lack of an overarching narrative. I speak to other business people every day and I’m always struck by the drive and energy. People want to grow and create jobs and prosperity.
“Government needs to be creating the optimum conditions for that to happen but whether today’s announcements are good or bad, it just feels like we are nibbling at the edges. There needs to be a clear narrative but, right now, I’m not seeing one.”
Dean Rogers, managing director of Liverpool construction and fire safety specialist, Frank Rogers, said he was pleased to hear of changes to training for young people. He has spoken this year about the need to inject more skills into the building sector.
Rachel Reeves said a new Youth Guarantee will give £820m towards trying to guarantee every young person a place in college, an apprenticeship or personalised job support. After 18 months,18-to-21 year-olds will be offered paid work instead of benefits.
Since the apprenticeship levy was introduced in 2017, only large employers with a payroll in excess of £3m pay into the levy at a rate of 0.5% of salary costs. The contributions go towards funding all parts of the apprenticeship system.
SMEs then make a co-investment payment of 5%. In 2024, the Conservatives scrapped the 5 per cent co-investment payment for SMEs when they hire an apprentice under the age of 22. Reeves will extend this co-investment relief to those aged 22 to 24.
“Recruiting and finding people with the right skills remains a constant challenge for Frank Rogers and others in our sector,” Dean said. “Bringing young people in at entry level is an effective way to build a skilled workforce, but it does come with both cost and risk.
“Many construction businesses are still feeling the impact of last year’s Budget and the financial pressure it created.
“These new measures will go some way towards alleviating pressure and make it easier and more cost-effective to hire young people. We can fill those skill gaps and give young people the chance to make a career for themselves.”
“However, at the same time, the Chancellor has increased pressure on businesses by raising the minimum wage and taxes on dividends.
“She acknowledged that building roads and homes is vital to Britain’s economic growth — yet for labour-intensive companies like ours, rising wage bills mean the strain on the construction sector is still significant.
“The Chancellor needs to strike the right balance between raising essential revenue and avoiding policies that discourage business investment.”
Liverpool BID Company chief executive Bill Addy observed “there’s not a huge amount that’s positive for our businesses within the visitor economy”.
He said: “There shouldn’t be a barrier for hiring younger workers, and while the training for apprenticeships for under 25s in SMEs is welcome, the cost for hiring remains high.
“There’s a balance to be drawn between making sure people can afford increasing living costs and have some more in their pocket, with making sure employer costs don’t prevent hiring.
“The problem it’s coming in a storm for business, with high energy costs and, locally, the removal of free parking in the evening (in Liverpool city centre), which has hit hospitality in particular.
“Keeping business rates at the lower rate for retail, leisure and hospitality is great but we shouldn’t forget that larger retailers with higher rateable values of over £500,000 are important places on our bricks and mortar high street offer.”
On the visitor levy, he added: “The announcement of the introduction of the tourist tax, alongside the suggested departmental cuts that will hit local government spend, means the private sector is essentially plugging the gap of that lack of investment.
“If the tourist tax is to go ahead, then hotels should get the same benefit of 10% VAT as they do in Barcelona. Business Improvement Districts are meant to provide additionality, not fill in the holes left by a reduction in public spending.”
Danny De Angelis is managing director of specialist hi-tech Liverpool city region manufacturer Tracoinsa System which designs, develops, manufactures, and assembles materials handling and special purpose equipment for multiple sectors.
His concern is whether the Chancellor and other ministers really understand what is needed to encourage business growth. He told LBN: “The Chancellor will raise tax here, cut it there… but is there an overall strategy?
“We can look at the items in the Budget in isolation and say ‘yes, that one is good for business but this one is not so good’. However, the UK now has a longstanding business and productivity problem. What is the plan to address and fix that?
“I, like many others in the manufacturing sector, am struggling to see a solid, coherent industrial strategy, one that prioritises skills, investment and creating the right environment for businesses to thrive. We need a plan and quickly.”