October and November member discussions were dominated by the 30 October Autumn Budget. In the lead-up, there was much speculation as to which policy announcements might be made and the likely impact on business. Indeed, policy rumour led some to make business decisions ahead of firm announcements, particularly in relation to anticipated rises in capital gains tax. 

When the detail contained in the Budget was finally released, the discussion turned to other topics, principally policy impacting the labour market. 

ICAEW’s business team sought insight and feedback on Budget announcements from ICAEW members through outreach, committees, community advisory groups and our regional and national volunteer networks. 

Overview

The general consensus among ICAEW members was that the Budget presented challenges for business. Of particular concern were changes to employers’ national insurance (ENI) and the national living wage (NLW), both of which were perceived as having a negative impact on margins and hiring decisions. While a change to the headline rate was expected, the reduction in the ENI threshold came as an unwelcome surprise. 

On the whole, members felt there was little in the Budget for growth, raising concerns over the possibility of future tax rises. “If raising ENI is so easy, why wouldn’t the Chancellor repeat this in two years?” This was the view of an adviser to the construction sector in the East of England. 

A member working in manufacturing based in the Midlands commented: “It was bad for business. The only growth is the size of the state.” Another member working in the education sector in the North West noted: “Policy is very disjointed, with many unintended consequences, and more than we’ve seen with previous governments.”

On a more positive note, announcements on infrastructure spend, including support for digital connectivity and sustainability, were welcomed, in the hope that public sector investment would boost private sector business involved in delivery. 

ICAEW reviewed policy announcements and provided detailed analysis through its Autumn Budget 2024 hub.

Farming IHT

ICAEW members working in farming were vocal on inheritance tax (IHT) announcements. A practice member advising the sector described it as “the last nail in the coffin for farmers”. Employment policies seem also set to impact this sector, bearing in mind it regularly hires workers on lower wages, both on a seasonal and part-time basis. Members of ICAEW’s Farming and Rural Business Community Advisory Group will reflect on the Budget and the impact on the agricultural sector at an event on 28 November. 

Members in Northern Ireland warned that changes to business property relief and agricultural property relief would negatively impact family-owned businesses. “Where it is not possible to borrow funds, land may need to be sold to meet IHT liabilities, leaving the risk of much smaller farms no longer being financially viable,” they said.

“NLW, ENI and the threshold reduction fundamentally changes the way we think about recruitment,” was a view from hospitality. “We’ve previously taken on school leavers, but this model has now been blown up and will impact on the decision to recruit younger workers.”

Travel, tourism and hospitality

The impact on travel, tourism and hospitality was discussed on this ICAEW webinar, which explored the impact of the Budget, with most concern raised over the reduction in the ENI threshold on a sector reliant on seasonal and part-time workers. 

A member working in healthcare further highlighted the potential impact of the ENI changes: “It’s the threshold on ENI that has really foxed us. Options include delaying pay rises, reducing recruitment or cutting services. We’ve considered raising prices but it’s difficult as we don’t want a hit to volume.” 

A practice member based in the Midlands who advises manufacturing business described the Employment Rights Bill, NLW and ENI as a “triple whammy” and predicted a massive uptick in unemployment as a result. 

What was missing?

On what was missing from the Budget, members working in retail bemoaned concrete announcements on business rates, describing this notable absence as a “kicker that will see the dying high street continue to die.” Government is in the process of consulting on transforming business rates, and ICAEW is keen to gauge the views of members to inform our response. 

Members also felt incentives for growth were missing, with some calling for more relief for owner-managed businesses to encourage investment.

“A lack of growth and ambition, or resolution of the structural issues of the UK economy” was a view expressed by a manufacturing business in Scotland. “More could be done to promote growth, which could be driven by tax incentives,” another member commented.

Balancing public and private sector investment

Although public sector investment was seen as positive, the balance between the public and private sector was brought into question. “Government seems intent on trying to accelerate growth through public rather than private investment, but this can only go so far and will require borrowing. There should have been more incentives for growing businesses to encourage private investment.”

The view that, in the long run, the Budget may provide a shot in the arm for growth was the subject of this ICAEW Accountancy Insights podcast episode. Time will tell on the long-term impact of the announcements, but for now members continue to navigate policy changes and the impact on their businesses.