'Just When We Needed It, We Got Nothing New': Business Leaders React to the Spring Statement
When Rachel Reeves delivered her Spring Statement on Tuesday, it was with a deliberately understated approach. The aim? To project an image of calm and stability amidst global economic turbulence and following a series of budgets that had previously seen tax increases. However, for many business owners grappling with escalating costs, this lack of new policy announcements was a significant letdown.
While changes to the business rates system are indeed set to take effect on April 1st, Ms. Reeves offered little in the way of immediate relief for companies still feeling the pinch from last year's increases in employment costs. Furthermore, there was a distinct absence of clarity regarding the long-delayed defence investment plan, a crucial element of promised spending increases.
The Guardian spoke with several business leaders to gauge their reactions to the Spring Statement and its potential impact on their operations.
Lincoln Green, Independent Brewer
Anthony Hughes, the proprietor of Lincoln Green Brewing Company in Nottingham, found the longer-term economic forecasts to be somewhat encouraging. "As a small business owner, you naturally want to believe in these projections," he shared.
However, this independent brewer has been contending with a surge in costs. The employer's national insurance hike from last year, coupled with a more recent tax increase on non-draught alcohol, has placed his business under "a continual squeeze," he explained.
Beyond his brewery, Hughes manages six pubs across the East Midlands, providing employment for approximately 80 individuals. He highlighted that inflation, which remains stubbornly above the Bank of England's target of 2%, continues to be a persistent challenge. Foot traffic has dwindled, and fewer patrons are purchasing pints, suggesting a reduction in disposable income. "People are going out less. This naturally leads to quieter pubs and, consequently, brewers selling less beer," he observed.
He contrasted this reality with the narrative presented by Ms. Reeves, stating, "She spoke of real wage growth and falling inflation. The picture she painted is quite different from the one I'm experiencing."
But here's where it gets controversial: Business rates continue to be a major hurdle for pubs, according to Hughes, even with a support package introduced in January aimed at mitigating the impact of a rates overhaul announced in the autumn budget. "The way pubs are assessed for rates is frankly outrageous," he declared.
He characterized the statement as a "jam tomorrow" scenario, where the message was that things would improve in the future, but without clear policies to facilitate that improvement. "I'm struggling to identify the implemented policies that will actually bring about that change."
Kaymet, Tray Manufacturer
Mark Brearley, who oversees Kaymet, a company specializing in metal serving trays and trolleys manufactured in London, commented, "Stability sounds like a fantastic idea, but many businesses are facing a genuine emergency right now," referencing the persistent issue of rising energy costs.
According to the industry group Energy UK, industrial energy prices are still 70% higher than they were before Russia's invasion of Ukraine, with gas prices 60% higher. The ongoing conflict in Iran also poses a risk of significantly pushing up oil and gas prices, which would inevitably impact domestic costs.
Brearley revealed that many metal manufacturers were already experiencing significant anxiety about energy prices even before the war began. His own gas and electricity expenses surged by 58% last year after renewing a long-term contract. "It hits you all at once, like a dam breaking," he described.
While Kaymet supplies to prestigious retailers like Harrods and Selfridges and exports to numerous countries, Brearley acknowledged that Reeves was right to focus on the macroeconomic landscape given international volatility. However, he stressed that last year's increase in employment costs continues to be a burden for smaller enterprises.
"Thousands of businesses are dealing with real day-to-day challenges, and a significant portion of our rising costs stems from government-driven decisions," he stated. "It’s no news just when we wanted some."
Cohort, Defence Technology Group
Andrew Thomis, the chief executive of Cohort, a defence technology company listed on the Alternative Investment Market (AIM), expressed satisfaction with Ms. Reeves' mention of defence spending. He found the new commitment to fund a £1 billion military helicopter project to be a positive development for the sector.
"What we urgently need now is the defence investment plan," Thomis emphasized, referring to the government's long-delayed strategic document for military expenditure, which was initially expected last autumn.
This plan is crucial for Cohort, which employs 1,600 people across its headquarters in Reading and other international sites, to make informed decisions about future production. The UK's commitment to increase defence spending to 5% of GDP by 2035 further amplifies the need for this plan.
"Substantial investment is required if the industry is to achieve the necessary production rates. However, to invest, we need clear direction," he asserted. "Currently, we are experiencing a significant cash squeeze."
Philip Morris & Son, Department Store
John Jones, who manages Philip Morris & Son, a department store in Hereford with a history dating back to 1845, was particularly unimpressed. "There was simply nothing substantial there. It felt like watching the same tired narrative of blaming the Conservatives and scoring political points against other parties," he remarked.
Jones highlighted that rising business rates are imposing a substantial financial burden on him, with his rates set to increase by 46% over a three-year revaluation period. This translates to an additional £9,000 this year, £18,000 next year, and £27,000 the year after.
"After the budget, I was hoping for some acknowledgment of the mistakes made regarding business rates. While they've addressed this for pubs, retailers have been overlooked," he stated.
And this is the part most people miss: "This situation truly frustrates me because pubs and retailers face similar cost pressures. However, shops are also battling a crime epidemic, where shoplifting is increasingly perceived as acceptable."
Last week, retailers reported 5.5 million incidents of shoplifting in the past year, costing the industry £400 million. "We have items being stolen daily, a problem that pubs do not encounter."
"It would have been beneficial to at least acknowledge this issue... but unfortunately, there was no mention of it whatsoever."
Hercules, Construction Recruiter
Brusk Korkmaz, the chief executive of Hercules, a construction recruitment firm, expressed his contentment with Ms. Reeves' attempt to foster greater stability for businesses. "Companies are only inclined to invest in their workforce when the government provides a sense of certainty," he commented.
The Gloucestershire-based company, which employs 1,700 people, specializes in recruiting for major infrastructure projects like the HS2 rail line. It has largely remained insulated from the downturn in the housebuilding sector.
He found encouragement in the Chancellor's apparent focus on a longer-term economic perspective, adding that inconsistent investment "undermines long-term planning... you have to think in terms of generations, not just years."
However, he remains cautious due to past instances of governments withdrawing from projects, such as the northern leg of HS2. "We do not want to see a reversal by delaying or abandoning any projects."
What are your thoughts on the Spring Statement? Did it offer the clarity and support businesses need, or was it a missed opportunity? Share your agreement or disagreement in the comments below!
