BUDGET MUST FIND EXIT TO FISCAL CAGE
The British Chambers of Commerce has urged the Chancellor to find a way to reset business confidence and escape the fiscal cage that has trapped the UK in a cycle of weak growth.
Successive Budgets have added to employment, energy, rates and regulatory costs. BCC analysis shows domestic policy-driven costs for a typical SME have risen by more than 70% in a decade. Currently, only 17% of firms plan to increase investment – the lowest level since the pandemic. The Budget will only be judged a success if this figure starts to rise.
The Government’s pre-Budget announcements on AI investment and resilience, stronger public finance institutions and devolved funding for local leaders in England are welcome signals.
But there have also been a number of rumours circulating on potential changes which could work in the opposite direction. Wednesday’s test is whether the Chancellor can release the brakes on private-sector growth.
Shevaun Haviland CBE, Director General of the BCC, said:
“Businesses have been down this road too many times before. Successive Budgets have drained their confidence and left too many investment plans gathering dust on the shelf.
“Wednesday is a huge opportunity to finally change those dynamics. If the Chancellor raises any taxes on business, the fiscal cage will simply get smaller: weaker confidence means weaker investment, weaker growth and less revenue.
“The announcements on AI, regional growth and investment finance point in the right direction. But government spending at this level cannot substitute for hundreds of thousands of firms choosing to hire, expand and export.
“The Chancellor has a real opportunity to cut the cost of employing young people, ease energy and business rates pressures, and restore dependable export support in every English region. Firms also want to see a stable, long-term tax roadmap with no fresh business tax rises.
“Business is not asking for a blank cheque. It is asking for breathing space and a fair chance to grow. Back business now and it will deliver the jobs, investment and tax revenues that rebuild the public finances.”
On possible changes to Apprenticeship funding, she said:
“I would urge the Chancellor not to go down the route of further cuts to funding for higher level apprenticeships, used to develop more experienced staff. This would lead to less investment in current employees and reduce the size of the pipeline for new apprentices.”
On the National Living Wage, she said:
“A slowing in the rate of increase would be the sensible option, with a gap maintained between the rates for adults and young people. Labour costs are the biggest pressure on firms to increase prices. After years of inflation-busting rises in the national living wage, firms have little room for manoeuvre, especially on top of National Insurance and Employment Rights Act costs.”
The BCC’s three immediate priorities are:
- Employer National Insurance relief for under-25s
- A targeted package to reduce business energy bills and rates
- Consistent, locally delivered export support.
These should sit alongside a credible roadmap for tax, skills, planning, infrastructure and fiscal devolution.
A fuller summary of the BCC’s budget submission can be found here.