Insights by Mo Jamei CEO, Bradshaw Economics
With just a day to go until the Budget, there is no shortage of speculation about what the Chancellor might do. At least this year there has been much less kite-flying so we’ve had to be more creative with our speculation.
As major business groups and trade associations have published their asks over the last month or so, there’s an interesting theme amongst them all in that they’re all so modest.
There used to be a time when Budget submissions were full of aspirational ideas: new incentives, tax breaks, investment programmes or reforms that sectors hoped might give them a boost. I remember our CBI campaign, along with Make UK and Energy UK, to make full expensing a permanent feature of the tax system in 2023, which was costed at £8-10bn and we got that over the line. Earlier that same year, we also helped secure the expansion of 30 hours of free childcare for eligible working parents, which I now fully appreciate as a working parent…
But over the past couple of years, the tone has become much more defensive. This summer I helped draft the CBI’s Roadmap for Growth before I left, which tried to set out a broader theory for how to create the conditions for businesses to invest, hire and grow.
That still feels to me like the right way to think about growth. But looking at the submissions going into this Budget, the conversation is happening one step earlier: businesses simply want enough breathing room to make those investments in the first place.
The FT characterised the business mood neatly as wanting a “do no harm” Budget.
So here is my somewhat unoriginal list of the top five things the business community will be looking for on Wednesday:
1. Make it cheaper to employ people
The CBI and British Retail Consortium have both called for the threshold at which employers start paying National Insurance to rise from £5,000 to £6,000, concentrating the benefit on lower-paid and entry-level jobs.
Make UK would go further, while the BCC and techUK have focused specifically on reducing the cost of employing younger workers (though I am not convinced).
Retail, hospitality and other labour-intensive sectors employ large numbers of people in relatively low-paid, part-time or entry-level jobs. When the fixed cost of employing somebody increases, it becomes increasingly difficult to make the economics of an additional hire work.
For businesses, therefore, the youth employment debate cannot just be about getting people ready for work. There also have to be jobs for them to move into.
2. Bring energy costs down
Energy is probably the other issue with the widest agreement across business.
Make UK has understandably put industrial electricity prices close to the top of its list, alongside calls to widen support through the British Industrial Competitiveness Scheme.
The basic complaint is that too much of the cost of delivering energy policy is loaded onto electricity bills, at exactly the point when government is also asking businesses to electrify more of their operations.
If the Government really wants more advanced manufacturing, data centres, clean technology and other energy-intensive investment in the UK, the relative price of electricity matters.
You can have a very good industrial strategy on paper and still undermine it through the cost base businesses face when those investments compete internationally.
3. Fix business rates
Then there is business rates. I don’t remember a fiscal event where somebody wasn't calling for their reform, but the difference now is how widespread the frustration has become. It makes almost everyone unhappy. And it’s not just the size of the tax that is the problem; increasingly, it’s what we are taxing.
Invest in a shop, office, factory or hotel; improve it, make it more energy efficient, expand it or add productive equipment and, in all of those cases, you will eventually end up with a higher tax bill attached to the site. A very awkward result for a government that wants businesses to invest more.
I spent far too much of my time on this issue at the CBI as well. The work we did argued that reform needed to be built around certainty, transparency, simplicity, competitiveness and fairness rather than another set of temporary reliefs or sector-specific fixes.
In August 2024, we counted 26 different reliefs in the business rates system across the various systems we have in the UK - devolution means each of our four nations has its own system. I haven’t counted it recently but I know that they’ve gone up…
The way to fix it varies by sector, but the principle is consistent: the tax system shouldn't penalise businesses for investing in the physical assets we want them to invest in.
4. Give businesses some tax and regulatory certainty
Businesses just want to know the rules of the game.
The argument isn’t that businesses never expect taxes to change, but that investment decisions are made over much longer horizons than any given Budget.
The Institute of Directors has called for a more predictable tax environment. techUK has explicitly asked for no further increases in business taxation. UK Finance and TheCityUK have made similar arguments for financial services.
That is particularly relevant this week given the growing speculation that the Chancellor could increase banking taxes - while simultaneously asking the sector to provide more capital for infrastructure, housing and growing businesses.
If a company is deciding whether to build a new facility, hire another 100 people or put capital into the UK rather than somewhere else, the tax rate will matter but, in many cases, not as much as the confidence that the calculation will not change again six months later.
It is depressing that the Corporation Tax Roadmap published 2010 is still regularly cited as one of the best examples of giving businesses a tax framework they could actually plan around. That was 16 years ago.
5. Create the conditions for businesses to invest
This is where I think the debate gets a bit more interesting than simply adding up tax cuts.
Businesses aren't only asking for lower costs. The same submissions contain asks around infrastructure, access to capital, skills, AI adoption, export support, planning and grid connections. This gets much closer to the argument we were trying to make in the CBI's Roadmap for Growth.
Reducing costs gives businesses some of the headroom to invest, but the wider environment still has to make those investments stack up.
A grid connection that takes years to secure has an economic cost. So does a planning delay, not being able to find the right skills or an infrastructure project being pushed backwards again.
Businesses don't experience these things as separate policy problems. They all form part of the same investment decision and each can be a deal breaker in its own right.
That is why I think the increasingly defensive nature of these Budget submissions matters. It isn't that businesses have suddenly lost their ambition. It is that more of their time is being spent asking government to remove things getting in the way before they can get onto the more interesting question of where they want to invest and grow.
So what should we look for on Wednesday?
The Chancellor obviously can't meet every business ask, particularly given how much harder the fiscal position has become, and the submissions I've read recognise that.
But I don't think the right test is how many individual recommendations from the CBI, BCC, Make UK or anyone else the Chancellor accepts, nor whether we have a tax-raising or tax-cutting Budget.
The better test is what the whole package does to individual business decisions.
Does it make employing the next person easier? Does it make investing in the next factory, shop or piece of machinery more attractive? Does it make the UK a more compelling place to allocate the next pound of international capital?
In the end, growth is the accumulation of thousands of decisions like those.
So the question I'll be coming back to throughout Wednesday is a relatively simple one:
Does the overall package make the next hire, the next investment and the next expansion in the UK more or less attractive?
