North West business leaders have their say on Rachel Reeves’ ‘Budget for growth’

There may yet be ‘unintended consequences’ from Chancellor Rachel Reeves’ Budget – that was the message from North West business leaders and analysts this evening.

Liverpool City Region’s political leadership has already shared its views on the Budget, with Metro Mayor Steve Rotheram saying he was pleased the region had an opportunity to secure its own specific funding agreement resembling pioneering arrangements established for Manchester and the Midlands.

Subrahmaniam Krishnan-Harihara, deputy director of research at Greater Manchester Chamber, said tax rises had been expected, so the increases in employer NIC and changes to capital gains tax (CGT) and inheritance tax (IHT) came as little surprise. But he warned that other Budget measures could yet have ‘unintended consequences’.

Regarding retail, he said: “The UK high street has been struggling since the Covid-19 pandemic. The retail, hospitality and leisure relief provided a 75% reduction in business rates capped at £110,000. The Chancellor is maintaining a less generous version of the retail, hospitality and leisure relief of 40% again capped at £110,000. For those retail and hospitality businesses at the smaller end, this could present an increase in their business rates bill.

“Beyond rates, businesses in this sector face another eye watering increase in operating costs: the rise in National Living Wage and National Minimum Wage respectively by 6.7% and 16.3%, scheduled for next April, is likely to hit this sector amongst others. The combined impact of slightly higher business rates, much higher employment costs and increase in employers’ NIC risks presenting a perfect storm. Alongside these increases, apprentice wages are going up by 18% to £7.55 per hour.”

The Chamber also hailed news Greater Manchester will receive the integrated settlement from the Devolution Trailblazer starting April 2025. Mr Krishnan-Harihara noted that while the Transpennine route upgrades also received a mention, “much of this had been previously committed to under the Integrated Rail Plan for the North and Midlands three years ago”.

He added: “On investment, the pillar for the Chancellor’s growth agenda, announcements included some previously committed funding under the aegis of the National Wealth Fund. Overall, public sector net investment is expected to average 2.6% of GDP over the term of this Parliament. This amounts to an average £20 billion per annum. This is not substantial. With business taxation going up, the Chancellor may also struggle to drive up private investment.

“Perhaps, unsurprisingly, the medium-term growth forecasts have been revised down in the OBR’s assessment. The OBR expects the UK economy to grow by 1.1% this year, 2% in 2025 and then slow down reaching 1.5% in 2028. These forecasts indicate that, by the end of this decade, the UK economy will not be significantly larger than it is now, which clearly defies the claim of ‘growth, growth, growth’.

“At a time of fragile economic growth and rising public sector debt, the UK faces a profound choice: how to foster a robust economy while preserving the principles of fairness, opportunity and growth. The UK’s economic recovery and longer-term growth lies not in short-term fixes.

“And it certainly cannot be achieved through burdening businesses, especially small businesses. Policy tweaks to raise more employment related taxes by either actively raising NI contributions or through passive measures such as freezing tax thresholds may seem attractive but invariably go on to have ripple effects that stretch beyond a Parliamentary term.

“They tend to disproportionately affect small business, who tend to operate on tighter margins and will struggle to absorb the added cost pressure. And if the consequence is that small business owners decide to downsize, curtail business investment on expanding productive capacity or scale down staff training even as consumers facing higher tax bills scale down discretionary expenditure, the very thing the Chancellor is seeking, growth, is in jeopardy.

“If, in the lead up to the Budget, business confidence and consumer confidence plummeted, there wasn’t much in the Budget to boost confidence barring the consolation that it could have been a lot worse. No doubt, the Chancellor and her team are aware of the principle of unintended consequences. They may just have chosen to ignore it.”

Liverpool Chamber: Business remains fearful

Paul Cherpeau, chief executive of Liverpool Chamber, said: “The imperative at this Budget was for the government to provide confidence and reassurance to businesses. It is clear the Chancellor has sought to provide longer term clarity across a range of areas, but there are also a number of issues which will no doubt leave businesses fearful.

“Businesses will be encouraged by a new long-term programme of public investment and capital spending on infrastructure upgrades and boosting high-growth sectors.

“Hospitality and leisure operators may give a cautious welcome to permanent reliefs for business rates and the cut in draught alcohol duties, hopefully giving them some breathing space and a level of certainty moving forward.

“However, increases in employers’ National Insurance Contributions, the significant reduction in the threshold and the increase in the National Living Wage will leave many businesses worried about how they will be able to afford those extra payments, never mind recruit more employees.”

Alliance Manchester Business School: Budget shows shift in strategy

Ken McPhail, Head of Alliance Manchester Business School said: “Today’s budget signals a shift in UK economic strategy in two ways. The energy profits levy, employers NI hike, minimum wage increases and VAT on private schools means the private sector and the better off will undoubtedly pay more. Supporters of Reeves will say that this reflects a focus on economic fairness needed to address the sense of disenfranchisement in many left behind neighbourhoods. Second, it’s a budget that prioritises public investment, for example in healthcare and education. It’s an approach that we’ve not seen in quite some time.

“Beyond the question of redistribution is, of course, growth and where it will come from. This is definitely a more interventionist government that doesn’t have the same faith in markets as its predecessors. The new National Wealth Fund, for example, will deliver funding to industries with highest growth potential. However, more needs to be done here to link local pension funds with regional growth to drive investment into growth areas. That said, positive announcements on devolution will increase the autonomy needed to more effectively coordinate local economic industrial strategy.

“Of course there was also a lot missing from the budget. Perhaps this was to be expected, however. Today’s budget is, after all, only a one-year budget settlement. The big budget decisions will follow the Spending Review process that will conclude in May or June next year that will set the spending envelope for the following three years.”

Hydrogen updates welcomed

The North West Hydrogen Alliance welcomed news that 11 hydrogen projects across England, Scotland and Wales will receive funding – including Barrow-in-Furness.

Dave Richardson, interim chair of the NWHA and Decarbonisation Solutions Director at Costain said: “As an Alliance, we’re pleased to see such a strong commitment to the hydrogen and carbon capture sector, which will be essential in decarbonising key industries across the country—such as low-carbon refining, glass, and chemical manufacturing. This support not only helps to protect thousands of existing jobs but also attracts new businesses, moving Britain closer to becoming a clean energy superpower.”

Bruntwood SciTech: what does the Budget mean for innovation?

Jessica Bowles, director of strategic partnerships and impact for Bruntwood and Bruntwood SciTech, commented: “This was always going to be a tough budget, with the new government having to set out their stall for the first time post-election. The focus on growth and investment supported by important changes to the fiscal rules will give many businesses reason for optimism.

“Capital for infrastructure improvements will help us to unlock the potential of the country’s fastest growing regional cities, particularly Manchester, Birmingham, Leeds and Liverpool, and improve access to its high-growth sectors which have the biggest potential for economic growth. We were particularly pleased to hear specific commitments to reinstating plans to take the HS2 line from Birmingham through to Euston, upgrades to the Trans Pennine routes that will support Manchester, Huddersfield, Leeds and York, as well as capacity upgrades at stations such as Bradford and Manchester Victoria. This is a strong commitment from this government to improving connectivity that will provide many reassurances to the business community.

“These improvements have long been argued for by the Metro Mayors. We are therefore very supportive of seeing both Greater Manchester and the West Midlands being awarded the first single funding settlements next year, allowing them to continue to prioritise the most significant, meaningful investments in the areas that matter most to local people.

“The Chancellor’s £20bn commitment to protect R&D funding to ensure the UK can harness the full potential of its science base, alongside its initial commitments to a new Industrial Strategy, will be well received by many like us and we welcome the Government’s recognition that more can be done to capitalise on the nation’s strengths in science and support diffusion of innovation across the country to drive sustained increase in productivity. It was particularly heartening to see the commitments made into diagnostics and testing, providing more access for diagnostics businesses to grow and gain further and faster access to the NHS, something that private sector partnerships with the NHS, like those we have with Manchester University NHS Foundation Trust, can additionally accelerate to make real improvements in healthcare at pace.

“We need large scale sustained commitments to support the commercialisation and growth of the science, tech and innovation sectors in the long-term, and look forward to digesting today’s commitments in greater detail to help inform our recommendations ahead of the end of the consultation period for the Industrial Strategy next month.

“Beyond this, there were a number of other areas it was very reassuring to see commitments made, including £5bn investment in housebuilding, confirmation on the continuation of the Investment Zones and extension of the Innovation Accelerators, where stakeholders should now have the confidence to move forward with these plans that have the potential to supercharge the UK’s economic growth.”

Tech Climbers founder: What does the Budget mean for tech?

Anna Heyes, CEO at Active Profile and founder of Tech Climbers, an initiative which spotlights and celebrates the best performing tech businesses in Northern regions, said: “All in all, today’s budget showed steps forwards, back and sideways when it comes to the tech sector and innovation.

“With research and development also making up such a huge part of our talented tech talent in the UK, our brightest minds will benefit greatly from the Chancellor’s promise of £20bn in funding, but is this enough to create a global magnet for innovators?

“The ability to harness and grow a strong technology ecosystem will be one of the drivers underpinning the UK’s ‘modern industrial strategy’, so it’s encouraging to see the chancellor putting plans in place for the sectors with the ‘biggest growth potential’ and confirming nearly £1bn for the aerospace sector, over £2bn for the automotive sector and up to £520m for a new Life Sciences Innovative Manufacturing fund.

“For founders, the maintenance of the lifetime limit for business asset disposal relief at £1m, to encourage entrepreneurs to invest in their business, will go some way to comforting founders who will be affected by the Capital Gains Tax increase.

“Mixed messaging around employers’ national insurance contributions will need to be understood and processed for many founders with teams. The tech sector creates high-value jobs – something that every region needs for prosperity – hopefully this won’t work against us in the short to medium term.

“At a local level, commitment to the TransPennine rail link, an integrated settlement for Manchester and commitment to more local funding should all have a positive impact on start-ups and businesses in Northern regions.

“So, is there a conclusion to draw here? Whilst as usual there is lots of detail needed following the Chancellors headlines to create reality for founders, my gut says people have waited for this budget and want to see investment action now. The Government is under pressure to move quickly and provide clarity. The tech community wants to move forward because we can’t afford to stand still any longer, other global countries are vying for the innovation we’re investing in, so time is of the essence if we’re going to retain this talent in the UK.”

Chef and entrepreneur warns hospitality still faces ‘fraught’ year

Paul Askew, chef patron and owner of The Art School in Liverpool, said: “The new government has increased costs for hospitality in today’s budget. And they’ve given nothing whatsoever in terms of VAT recalibration or support plus business rates relief is being reduced too, nor do they show any understanding of the situation we are all facing across the entire industry. 2025 is going to be another fraught year, with upwards of £3billion in extra taxation to contend with on top of many other ongoing challenges that are not going away anytime soon.”

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