The Chancellor’s budget is a bi-yearly event of political theatre, with policies surrounded by grandstanding and jeering. Through all this noise, it can be hard to get to grips with the specifics of the policy and how it is going to affect your business. This article provides a snapshot of the key announcements for business owners and entrepreneurs devoid of party politics. Read on to get all the crucial information following the 2021 Autumn Budget and Spending Review.
When giving the Autumn Budget and Spending Review a general look over, there were a few comments and announcements on the overall health of the economy. The Chancellor seemed confident that at our current recovery, the economy would return to pre-Covid levels by 2022. This announcement gives a somewhat positive outlook going forward for many business owners when it comes to planning over the next few years and focusing best on how to recover from the past couple of years. Another key statement regarding the economy was the reduction in the expected rise of unemployment. At the last budget in March, unemployment was expected to spike to 11.9% next year, which painted a worrying picture for small business owners trying to balance the burden of wages and operating costs. In this most recent budget, however, the Chancellor revised those figures in light of the economic improvement we have seen in the past quarter. The new predicted figure for what unemployment could reach next year now sits at 5.2%, a significant reduction.
Despite all this positivity there was some concern from many business owners regarding the ever growing rate of inflation. This can manifest itself in a concern about the rising cost of living for small business owners, compounded by the fact that this also leads to an increased cost of borrowing, which could ultimately also hit small business owners in the pocket who have had to take on debt to keep operating over the past couple of years. Whilst an increase in inflation can benefit those with savings or assets, the majority of smaller business owners usually rely on borrowing at the start to build them up.
The final general point to all industries in this budget was the announcement of an increase of the National Living Wage (the minimum wage for all those in the UK aged 23 and over) to £9.50 an hour. Whilst the economic debate surrounding the effect of the rise of wages, it’s hard to ignore that it’s needed. With the inflation and cost of living rising, the buying power of a person’s wage reduces. This, in the short term, can lead to a huge decrease in productivity and employee satisfaction which ultimately can cause big issues for your business down the road. After the implementation of this higher wage, some small businesses might struggle in the short term, however, with the majority of the country also earning a higher wage. The amount of possible money coming into your business will therefore increase, to help offset the extra cost associated with the rise.
The headline industries which are having a short and long term shakeup are Hospitality, Retail, and Leisure with changes to business rates, alcohol taxes and beer duty all round. Hospitality venues recovering from the effects of Covid will be looking intently at what the Chancellor has announced. During the effects of this pandemic many heads of industry have called on the government to either overhaul the business rates system, or just to cancel them whilst those sectors recover. The Chancellor decided to meet the industry half way and announce a cut in business rates by 50% in 2022-23 up to a maximum for £110,000. Alongside this announcement there was a statement that business rates will get reformed, but we await further detail.
Probably the industry which received the most attention from the UK’s Chancellor was that of alcohol. Whilst some cynics might argue that the huge focus on alcohol was just a way to win over a few votes, it can’t be ignored that the hospitality industry has been massively struggling over the course of the pandemic and beforehand. So a package aimed at reviving the hospitality industry can give hope to those working within that sector.
Firstly, the announcement regarding the cancellation of the proposed rise of duty on beer, wine and spirits. Giving smaller chains and free-hold venues the opportunity to avoid having to do too much of a price increase on their wet offerings. The system of duty on all alcoholic beverages is also being overhauled with the current system having 15 different rates depending on the product to just 6, which massively simplifies the process for venues and producers.
The aim of restructuring the duty rules surrounding alcohol is to move towards a system which taxes based on percentage, to reduce the price of low alcohol beers, fruit ciders and sparkling wines, and increasing the tax on high strength ciders and spirits in an attempt to promote responsible drinking. Whilst this might see an increase in the price of certain “cheap” drinks in bars or supermarkets, it should lead to an overall fairer system of duty on these products.
There was also announced a cut in the duty paid on draught products of over 40 litres by 5%. This gives a big boost to hospitality venues as the draught products ordered to these premises are usually over the 40 litre cutoff. This would allow hospitality venues to offer price cuts or deals on draught beer and cider to promote their business and drum up interest after the decline over the pandemic.
The aviation industry is another area which has seen a large change through this budget announcement. With the sudden halt to commercial air travel during the pandemic, many businesses who operate within that industry have come under great financial pressure from travel agents to airline operators. For months, heads of the industry have been calling on the government to put more support in place to prevent industry wide job losses. In response to this, firstly, the government has extended the financial support offered to airports for another 6 months. Moreover, internal flights within the UK have had their air passenger duty reduced, which could lead to cheaper flight prices going forward. This boost could give a short term boost in time for the UK’s ‘staycation’ season, as more people chose to holiday within the UK in the aftermath of the lockdowns.
The last month of news was dominated by the fuel crisis, with stories of individuals struggling to get fuel. This effect has also been felt by the majority of businesses, whether they be in the transport industry or not, as the availability and price of fuel can have a knock on effect on your employees. A step the Chancellor announced in an attempt to relieve the pressure of this crisis was to cancel the planned increase in fuel duty. This policy should aid in stemming the large rise in fuel prices as the after effects of this crisis comes to fruition.
Skills and Employment
The final main area of the economy in which the Chancellor’s budget was addressed was that of skills and employment. As a business owner, the skill level in the employment market will always be of keen interest as, with a better educated and skilled workforce, more individuals can show their potential for growth. In an attempt to achieve this it was firstly announced that the government spending on skills and training will be increased by 42%, an increase of £3.8bn, over the duration of parliament.
What was left out?
When it comes to the national budget it can be just as important to look at what wasn’t announced alongside what was. This can usually show the attitude of the government on certain industries and crises. Whilst the reduction of business rates within three main sectors was welcomed, some retail business leaders feel that an opportunity was missed to change the business rates to support brick and mortar stores in the growing world of online shopping. The Treasury did confirm it would look into an “Online Sales Tax”, however, no concrete announcements were made so far.
Another area which didn’t get a mention in the budget was rail. With the workforce of a lot of businesses relying on public transport to get to and from work, an announcement on HS2 or the newly discussed HS3 (covering the North of England) would have been welcomed. This could be due to an announcement coming at a later date.
In conclusion, there are many policies in this budget which would have a positive effect on businesses. With more support across most industries, however, for a lot of businesses, it might not seem enough.
Nathaniel is a Web Design Executive who also writes content on technology and loves spending his days researching and building new projects, and generally complaining about new trends.