Chancellor Rachel Reeves delivered Labour’s first Budget in 14 years, announcing £40bn of tax rises, Central London Alliance comments
Given the straitened public finances it is understandable to leave no stone unturned when looking to balance the books, and we welcome the much-needed investment in the public services. But business owners, the ones creating jobs, are paying this bill. The likely outcome; job losses.
Business owners are the lifeblood of the economy, driving growth and creating jobs. They should be recognised, valued and supported, not burdened with increased interference and taxes on their ability to create jobs and stimulate and reward their enterprise. With the recent announcement, businesses have received a tidal wave of anti-business measures.
The Government states its focus is “national mission for growth,” businesses create growth in the UK economy, not the Government. The Government should be supporting businesses and entrepreneurs if they want to attract investors, grow the economy and create and sustain jobs and livelihoods.
Whilst the increase in the London Living Wage is an important boost for workers – London is the most expensive region in the UK to live and work – we must ensure that the capital remains a globally competitive place in which to do to both. Support must now be given to businesses, particularly SMEs and low-margin sectors such as hospitality to ensure they are in the position to match this new level.
If the cost to keep people in employment continues to rise, businesses will turn to other methods of delivery and off shoring, replacing UK jobs with those outsourced abroad.
The Central London Alliance has consistently called for the Government to
Reform Business Rates – the current business rates system is archaic and disproportionately burdens high street businesses, particularly those with real estate property assets, compared to their online competitors. UKHospitality warned that the sector faced an additional rates bill of £914m if the pre-existing relief ended as planned on 31 March next year. The reduction in relief will be disastrous for many businesses.
Figures supplied by commercial real estate intelligence firm Altus Group show that the reduction in rates support to 40% will mean an average 140% rise in business rates bills for more than 250,000 high street premises in England next year. Thousands of small- and medium-sized operators, which represent 99.2% of all the business population in the UK will suffer and face closure. Seeing empty stores and office buildings across the capital and the rest of the nation is unfortunately the new norm; the Government has only endorsed this.
Despite promises from various Governments to reform the unfair business rates system, this is still yet to be seen. Many firms are at risk of closure due to the existing system and for others it is a disincentive to invest. Reform is not just necessary, it is essential to prevent widespread closures and to support the economic resilience of our high streets.
It is imperative that the Government works with and supports central London and its businesses. The challenges facing global cities like London are significant, and London and its businesses must have the environment and tools it needs to recover sustainably, and improve its competitive advantage relative to foreign cities, in order to be as the best place to live, work, visit, study and invest.
Londoners alone contribute £59.3 billion to the Treasury annually, more than a quarter of the total for the whole of England. Central London’s dynamic businesses and rich culture and experiences are not merely job creators: they are critical to the UK’s global competitiveness and growth. When London prospers, so does the rest of the UK.
While the news about HS2 extending to Euston is welcomed, we need a commitment to infrastructure improvements in London beyond the capital renewals programme. Without significant investment in transport networks and a long-term funding plan for TfL, London’s ability to grow and compete globally remains hindered. Strikes and industrial action are disastrous for many London businesses.
The Government urgently needs to support the ambition and drive of London’s businesses, which is required to create growth and revitalise the UK economy. The CLA continues to urge the Chancellor to:
Reduce VAT for Hospitality, Tourism, and Leisure – The hospitality sector is hugely important for the UK economy, employing 3.5 million people and contributing £96 billion annually. However, uncompetitive tax rates are hampering growth and driving customers away. A reduction in VAT for this sector would not only stimulate business growth—potentially by up to 6% per year—but also enhance the UK’s attractiveness as a destination for both domestic and international tourists. The success of London’s recovery is dependent upon the ability of the 22 million international travellers that previously visited the capital every year to return to our global city. This is vital for sustaining one of our most important industries and preserving the nation’s soft power.
Reinstate Tax-Free Shopping for International Visitors – The absence of the tax-free shopping scheme is significantly disadvantaging central London’s retail sector, driving high-spending tourists to other cities such as Paris and Milan. Research from the University of Oxford indicates that reinstating this scheme could contribute £4.1 billion to UK GDP and support 78,000 jobs by 2025/26. The current situation is costing the UK economy billions and threatening jobs and livelihoods. This scheme must be reinstated as matter of urgency. The decision not to reintroduce the scheme is costing Britain £11.1 billion in lost GDP every year.
London is an unrivalled city and a global leader for business, culture and innovation; renowned and admired across the world for its enterprise and dynamism. It is also resilient but requires a Government to support its businesses with positive action to enable it to remain the much loved and admired global city, a magnet for investment and to ensure a strong and competitive future for our capital and country.
Support Business Continuity – There has been an immediate backlash from family-owned business including in the hospitality sector (not just farms) resulting from the Government’s attack on passing on businesses (which have been invested in over lifetimes) through the Chancellor’s punitive inheritance taxes. Nursing and care homes providers, hotels and restaurant chains, theatres, arts, and other venues, doctors’ surgeries, and many organisations who were thanked not so long ago for providing essential services during the pandemic and who stimulated the economy post lockdown have been told both to shoulder the tax burden and also to accept that their businesses cannot be passed down to their inheritors without new taxes which will require their heirs to break up these valued businesses to pay the Government.
Having weathered a cost-of-living crisis, soaring inflation, higher borrowing costs, and trade tensions, London businesses are losing faith in the Government’s economic growth strategy. We were promised stability and an operating environment conducive to growth, and yet businesses are now left shouldering the consequences of this Budget with minimal support.