Is this really a Budget for growth, or just another blow to the high street?
After a year in which the high street and the hospitality sector have endured the triple tax whammy of rising business rates, increased employer national insurance contributions, and the earlier uplift in the national minimum wage, it is difficult to see how the Government can claim that this budget meaningfully supports growth.
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Yes, the Chancellor’s rhetoric talked of “stability” and “renewal” but for the businesses on our high streets, the same businesses expected to lead economic recovery, the reality looks rather different.
For months companies have been wrestling with spiralling energy bills, wage pressures and patchy consumer demand. Inflation may be falling but price sensitivity remains acute across most sectors.
Newcastle saw the shockwave of these combined pressures between January and April with the sudden closure of several prominent hospitality venues.
These were not poorly run businesses they were casualties of a system that keeps loading costs onto operators faster than they can reasonably adapt.
Against this backdrop the decision to increase the national minimum wage by a further 4.1 per cent is a double-edged sword. While no one disputes the importance of fair pay, when wage inflation rises ahead of trading conditions, already thin margins are stretched even further.
For hospitality in particular, a labour-intensive sector still recovering from the aftermath of the pandemic and last year’s cost increases, this risks another round of job cuts or closures. It also raises questions about the Government’s commitment to bring inflation down.
Policies that raise core operating costs without offering offsetting support only make that objective harder to achieve.
One welcome measure in this Budget is the decision to reduce business rates for 750,000 retail, hospitality and leisure properties.
This is undoubtedly positive and aligns with what organisations like NE1 have been calling for over many years.
Crucially, this support will be funded through an increase in taxes on premises worth more than £500,000
This Budget rests on a combination of cautious optimism and familiar fiscal tactics, shifting spending, banking on future growth, and relying on tax receipts that may or may not materialise.
But on the ground where businesses are preparing for the crucial Christmas trading period, the measures announced offer little reassurance.
Many retailers make up to half their annual revenue between now and the New Year. What they need is immediate stability, predictable costs, confident consumers, and a sense that government policy understands the realities of modern trading.
NE1 has long argued for additional investment in attracting tourists, and the Vistor Levy announced in the budget will only work if these funds are controlled locally by people who understand the sector and what will deliver the greatest return on investment.
In other words, a hypothecated tax, which ringfences the money generated, and is only spent on initiatives that deliver additional overnight stays.
There is justified concern within the sector that funds raised will be used to subsidise existing activities, or those that should be funded by general taxation such as VAT, which is double the rate in comparison to our European neighbours.
The major disappointment in the budget is the Chancellor’s refusal to reduce VAT for the hospitality sector. This is the single biggest lever the Government could have pulled to offer immediate meaningful support.
Cutting VAT would have eased pressure on struggling businesses, protected jobs, and provided the breathing space required to invest in staff and long term growth.
With the Christmas Markets underway we are seeing first-hand the strain smaller retailers are under. These events should be a showcase for independent traders and a chance to strengthen revenue and bring people into the city. A modest VAT reduction would have transformed their prospects at a time of year that should be buoyant not burdensome.
For years we have argued for two straightforward steps, a VAT reduction for hospitality and sustained business rates relief for retail hospitality and leisure.
These sectors are not fringe interests, they are the backbone of our cities and employ millions nationwide.
They animate our streets, support local supply chains, and provide vital first jobs and careers. If they falter, whole communities feel the impact.
We do not need sweeping disruptive reforms. We need the opposite; we need a period of calm in which businesses can plan without fearing the next wave of unexpected cost increases.
Stability combined with targeted relief would do more to stimulate growth than any headline grabbing initiative.
The resilience of our high streets is not limitless. If support continues to arrive too late, more businesses will slip through the cracks and once a high street business closes it rarely returns.
The Government says this is a Budget for growth. If that is to be believed it must start listening to the sectors underpinning our cities and deliver policies that reflect their real-world challenges.
Anything less is not growth, it’s managed decline.
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Stephen Patterson, Chief Executive at Newcastle’s Business Improvement District, NE1
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