.png)
4 hours ago
5
Rachel Reeves gave a deliberately low-key spring forecast on Tuesday, in an attempt to project calm amid volatility abroad and after repeated tax rising budgets.
But for some business owners struggling with rising costs, a lack of policy announcements this time around was a disappointment.
Changes to the business rates system are set to go ahead on 1 April, while Reeves offered little relief for companies still reeling from increases to employment costs last year. Nor was there clarity on the long-delayed defence investment plan, a key part of promises to increase spending.
The Guardian spoke to bosses about how the spring forecast could affect them.
Lincoln Green, independent brewer
Anthony Hughes, the owner of Lincoln Green Brewing Company in Nottingham, said the longer term economic forecasts sounded encouraging. “As a small business owner, you want to believe in this.”
But the independent brewer has seen costs rise because of last year’s employer national insurance hike, while a more recent tax increase on non-draught alcohol has put his trade in “a continual squeeze”, he said.
As well as the brewery, Hughes has six pubs in the east midlands, employing a total of about 80 people, and said inflation – still above the Bank of England’s 2% target – continued to be an issue.
Footfall has fallen and fewer people are buying pints, he said, suggesting people have less disposable income. “People are going out less. That means pubs are quieter, and brewers able to sell less beer,” he said.
“[Reeves] talked about real wage growth and falling inflation,” he added. “The image that she painted is somewhat different to the one that I see.”
Business rates remain a big problem for pubs, he said, despite a support package in January designed to lessen the impacts of a rates shake-up announced at the autumn budget. “The way pubs are rated is obscene,” he said.
“It was almost a ‘jam tomorrow’ statement. She was saying it’s going to be tough but it’s going to get better in the future. But I’m struggling to see the policies that she’s implemented that will actually do that.”
Kaymet, tray manufacturer
Mark Brearley runs Kaymet, which makes metal serving trays and trolleys at its factory in London.
“Stability sounds like a great idea but there’s a bit of an emergency for a lot of businesses,” he said, referring to rising energy costs.
Industrial energy prices remain 70% higher than before Russia’s invasion of Ukraine, while gas prices are 60% higher, according to industry group Energy UK. And the Iran war could push oil and gas prices up significantly again, with a knock-on effect on costs at home.
Brearley said many metals manufacturers were “freaking out” about energy even before the war started, and that his own gas and electricity costs went up 58% last year after having to renew a long-term contract. “It hits you all at once like a dam breaking,” he said.
Kaymet’s stockists include Harrods and Selfridges, but it exports to dozens of countries across Europe, the Americas and Asia. Reeves was right to focus on the macroeconomic picture given the turbulence abroad, Brearley said, but last year’s rise in employment costs continued to hurt smaller companies.
“Thousands of businesses out there have real day-to-day issues, and a lot of our rising costs are a result of government-related decisions,” he said. “It’s no news just when we wanted some.”
Cohort, defence technology group
Cohort, a defence technology company listed on the Alternative Investment Market (AIM), owns several businesses ranging from manufacturers of sonar systems for the Royal Navy to providers of data products for military training.
Andrew Thomis, its chief executive, said he was pleased to hear Reeves mention defence spending, and that a new commitment to fund a £1bn military helicopter project was encouraging for the sector.
“What we need now is the defence investment plan,” he said, referring to the government’s long-delayed blueprint for military spending for the coming years, originally due last autumn.
The plan will be important for Cohort – which employs 1,600 across its headquarters in Reading and other sites in Australia, Germany and Portugal – to make decisions on future production, he said.
The UK’s promise to increase defence spending to 5% of gross domestic product by 2035 sharpens that further.
“A lot of investment is needed if the industry is going to produce at the type of rate required – but if we’re going to invest we need direction,” he said. “At present we’re seeing a cash squeeze.”
Philip Morris & Son, department store
John Jones runs Philip Morris & Son, a department store in Hereford that traces its roots back to 1845.
“There was just nothing there. It was like watching the same tired old message of blaming the Tories and scoring political points against every other party,” he said.
Jones said rising business rates are costing him thousands: his will rise by 46% over a three-year revaluation cycle, costing an extra £9,000 this year, £18,000 next year, and £27,000 the year after.
“After the budget, I was looking for something that made reference to the mistakes they made [on rates]. They’ve rectified that for pubs, but not for retailers,” he said.
“This really winds me up because pubs and retailers have the same cost pressures, except shops have got this crime epidemic where shoplifting is now just seen as acceptable.”
Last week retailers reported there were 5.5m incidents of shoplifting last year, costing the industry £400m. “We’ve got stuff walking out the door every day, which is a problem pubs don’t have.”
“It would have been nice if that had at least been acknowledged … but no, there’s nothing there at all.”
Hercules, construction recruiter
Brusk Korkmaz, the chief executive of Hercules, a construction recruitment company, was “happy” to see Reeves attempt to give companies more stability. “Businesses only invest in people when the government gives certainty,” he said.
The Gloucestershire-based firm, which employs 1,700 people, recruits workers for infrastructure projects such as the HS2 rail line, but has been broadly insulated from a slump in housebuilding.
He said he was encouraged by the chancellor seeming to take a longer term view on the economy, adding that inconsistent investment “undermines long term planning … you’ve got to think in generations, not years”.
However, he remained wary after previous governments pulled out of projects such as the northern leg of HS2. “We don’t want them going backwards by delaying or pulling out of any projects.”
