Don’t take advantage of our passion for growth, business owners tell chancellor

Bunting said he still plans to pursue his dream of opening 30 cafés, serving premium coffee, freshly prepared food and friendly vibes, but did not want to be taken advantage of simply because he is “naively passionate to grow” his business.

“If I was sitting here and had 200 shops and a wealthy individual, I feel like you could ask me some pointed questions about my personal life that might challenge what I am about to say,” said Bunting, 40.

“But I started a brand with my mate in Uttoxeter [Staffordshire]. I have a wife and two kids. I work a ridiculous amount and employ 130 people. And the budget’s impact for us alone, with eight stores, is going to be close to an extra £200,000 a year, and additional cost on top of that.

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“So [for ministers] to feel like it is not impacting a working person is a little bit disrespectful. I certainly feel like a working person, and I don’t want to be taken advantage of just because I am passionate enough to want to create something that has purpose, employing people and creating good jobs.”

Bunting said that the unexpected changes to draw more lower paid and part-time employees into employers’ national insurance contributions had come as a particular shock for his £5.5 million turnover business.

“That was a hidden change that not everyone will understand but it is the most costly, single impact because of the way our business is set up, like everyone else in the hospitality sector. It was a sly change,” said Bunting. “It is going to impact everyone, whether that is [customers] buying a more expensive product or it might impact people deciding whether or not to start what we started back in 2016.”

Farmers took to the streets in Westminster on Tuesday to highlight the impact of inheritance tax being imposed on family farms. They have benefited for decades from exemptions from the tax for both agricultural and business property to facilitate the long-term ownership of their assets.

Family business owners have opted for less direct action so far. Stuart Paver, the second generation of his family to own and run Pavers, the York-based shoe retailer set up by his mother, Cathy Paver, in 1971, wrote this week to his local newspaper, the York Press, about the negative impact of the budget measures on family firms.

He chairs Pavers, while his son, Jason, is managing director. Known for selling comfortable shoes, it has 150 shops and posted pre-tax profits of £14.3 million on sales of £169.2 million in the year to February.

Paver, 63, said both the loss of some of the business rates reliefs introduced during the pandemic, and the rise of employers’ national insurance would have a “big effect”. He is particularly concerned about the imposition of inheritance tax on family firms. “Most businesses are there to pass down through the generations. It goes entirely against Rachel Reeves’s policy of encouraging long-term investment and growth in the economy,” he told Times Enterprise Network.

“I am all for companies paying their correct amount of tax and working and supporting their communities. But if this is going to destroy investment and long-term growth, surely they have to rethink it?”

He said his family business adopted a conservative approach to its finances, which meant “not taking too much out, reinvesting in growing it and the people who work for it, in the belief we would be handing it on to the next generation who would then hand the asset on to the next generation. It is not like an asset that you can monetise: it was meant to be an asset that is passed along the generational lines.” The imposition of inheritance tax “stops it”, he said.

Paver highlighted the reality for a family business making £1 million in profit that faced having to pay inheritance tax.

“You have £250,000 of tax [corporation tax] and you probably pay out £200,000 to £250,000 of dividends. You then have £250,000 to repair and renew the assets within the business and then £250,000 for expansion and reinvestment into new technologies to try to continue to grow the business.

“If you are paying out £250,000 in dividends, there is 40 to 45 per cent tax on that. So by the time you have paid off the inheritance tax you would have had 15 to 17 years of dividends [to cover the tax due] without taking a penny out for yourself.”

“It makes it not sensible to hold the shares and pass them on,” added Paver. “It probably ends up with a sale to private equity, who have a much shorter-term view on everything, don’t invest in the staff, don’t invest in growing in the same long-term way a family business would, so you get the worst of both worlds.”

Nicky Walker, the fourth generation of his family running Aberlour-based Walker’s Shortbread, is more sanguine about the impact of the budget. “Although a lot of businesses felt quite hard done by in terms of the extra outlay, I think it is all necessary and the law of the land,” he said.

“We can have a moan about it but those are the rules and the government was voted in fairly and we have got to deal with the consequences of that.”

The former Rangers and Aberdeen goalkeeper, who joined the company’s board in 2007 and became managing director in 2022, admitted the budget measures have had an impact on the 126-year-old firm, which employs 1,200 people across six factories. Walker was about to sign off a three-year investment plan before the budget, and is now reassessing it. “It’s back to the drawing board, a little bit,” he said.

“But to be honest when we were pulling our plans together, with a budget you always expect the worst and hope for the best. While there was noise when the government got in that they wouldn’t increase taxes, you always think it is going to happen. How else does a government raise money?”

Walker, 62, said that now there was certainty over the taxes, the £184 million turnover firm could plan. “You are not working under a question mark. There are now firm figures and we can act in accordance.”

He accepted that the tax rises were coming after a “blinkin’ difficult” few years in business, which has seen Walker’s reluctantly raise its prices to restore its margins to pre-pandemic levels. Butter, one of its main ingredients for its world-renowned shortbread, has risen in price from between £3,500 to £4,000 a tonne to £7,000 a tonne. “It is a huge escalation,” he said.

The budget measures, and wider trading costs, could mean a rethink about future investment, he added.

“The majority of our shareholders work in the business and we also have some shareholders, family members who don’t. If it gets to the case where the dividends that the company hopes to achieve aren’t achieved then that becomes an awkward conversation. Those not in the business expect to get some return on their investment. If we can’t offer that you are looking at potentially slowing down investment to appease shareholders.”

The key thing was to have clear communications with all the family shareholders, he added. “I am fourth generation and the fifth generation are about to come in under me in the business, and with that comes a responsibility. There has been 125 years of hard work and perseverance, to obtain what we have. It is absolutely the intent of the family to retain the business and to remain a family-owned and run business. That is our values, the mission.”