Chancellor Rachel Reeves announced the first autumn budget of the new Labour government on 30 October, setting out several changes that are likely to impact independent and small businesses.
Last week’s budget reinforced Labour’s commitment to “working people” by preserving the rates of income tax, employee national insurance and VAT but also included a hike in national living wage, an increase in employers’ national insurance contributions and an overall increase in alcohol duty.
The Federation of Small Businesses (FSB) Manchester and some of Manchester’s local business owners are concerned that such changes could have negative knock-on effects for independent businesses and venues.
Robert Downes, development manager at FSB Manchester, said: “Rising taxes and wage increases, alongside incoming employment regulations, will strain businesses, particularly in sectors with high labour demands.”
Sacha Lord, Night Time Economy Adviser for Greater Manchester and chair of the Night Time Industries Association (NTIA) also raised concerns about the budget’s effect on night time businesses in particular.
“In my view it’s clear this Budget falls short of what’s needed for [the] night time economy to thrive,” he said in a LinkedIn post yesterday.
National minimum and living wage increases
Starting in April 2025, there will be a 16.3% increase in national minimum wage for 12–20-year-olds and a 6.7% hike in national living wage for ages 21 and over, bringing it to £12.21 an hour. The government hopes to move towards a single adult wage over time.
But there are concerns that this will put increasing pressure on independent businesses, cafes, bars and music venues.
Mr Downes said: “These are eyewatering increases for many [small businesses] and will be insurmountable for some.”
Increase in employers’ national insurance contributions
Last week’s budget increased employers’ national insurance contributions (NICs) from 13.8% to 15%.
It also announced a reduction in the secondary threshold – the amount at which an employer starts paying national insurance on each employee – from £9,100 to £5,000.
“This will significantly impact many businesses that will now face higher wage bills,” said Mr Downes.
But there have been some measures to ease the pressures of rising taxes and wage increases on smaller businesses.
The employment allowance, which enables some smaller businesses to reduce their NICs, has been raised from £5,000 to £10,500 and Reeves said this will enable over a million employees to not see their NICs bills rise.
A continued freeze on fuel duty will also help small businesses with transport costs and Andy Burnham has confirmed Manchester bus fairs will remain capped at £2 into 2025.
But Mr Downes said the change to NICs could have negative knock-on effects in industries like retail and hospitality which have more low-paid workers as bosses could start reducing staff hours, not replacing staff, banning overtime or even reducing staff numbers to offset financial pressures.
Net increase on alcohol duty
Though the duty on draft products will be cut by 1.7%, non-draft alcohol duty rates are set to rise in line with the Retail Price Index as of February 2025.
The lower rate of the Soft Drinks Industry Levy is also set to rise significantly.
Nick Kenyon, who has been joint owner of independent Northern Quarter bar and music venue the Peer Hat for almost nine years, voiced concern over the budget’s effects on his venue.
Nick said he already experiences strains on maintaining the Peer Hat’s key values, including a commitment to holding free events on Monday and Tuesday nights, where the owners would cover the costs of putting on a gig and employing a sound engineer.
He has also faced increasing pressures in maintaining the ability to offer cheap pints in the generally expensive Northern Quarter area and making sure the venue pays good guarantees to bands.
Nick said, though “ostensibly good”, minimum wage increases, among other pressures, will eventually “squeeze out” small businesses.
The Peer-Hat co-owner also said the net increase on alcohol duty could have a knock-on effect on his venue as increasing drinks prices could lead costumers to look for alternative forms of enjoyment.
Nick said: “Ultimately, it will lead to price increases which I’ve tried my hardest to hold off at all costs because it reaches a point where it stops being viable for people to enjoy themselves in this way.
“There is a point that is fast approaching where it becomes untenable to have a music venue in a city like Manchester.”
Nick worries independent venues like his may also be compromised by the likes of Manchester’s 23,500 capacity Co-op Live, which caters mostly to larger bands and musicians.
His comments come only a few weeks after the NTIA issued a statement saying at the current rate of nightclub closures – 37% since March 2020 – the last night out is predicted to be 31 December 2029.
It remains to be seen how the new budget will affect Manchester’s independent businesses and night time venues as many budget changes will only come into effect next year.
But it is evident that independent business owners and small business advocates are already bracing themselves for the impact.
Featured image: Serena Murphy
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