Last week, Chancellor Rachel Reeves published a tough budget for business.
While our members acknowledge the need to stabilise public finances and support investment in public services, the acceleration of the tax burden will concern many businesses. In the absence of material growth, it will add to already high business costs and is likely to impact confidence and investment intentions.
The overwhelming sentiment from NI Chamber members around the increase in the business tax burden is one of apprehension. The UK government has stressed that its core mission is economic growth, which is what will ultimately bring long-term stability to our overall financial position. However, the decision to place such a heavy tax burden on businesses in a very fragile economy means difficult choices for employers.
Amongst our members, there is genuine and legitimate concern about the impact of increasing National Insurance Employer Contributions to 15% on top of a 6.7% increase in the National Living Wage. While the increase in the employment allowance to £10,000 is welcome, it will be a material help to our smallest employers only.
In recent days we have consulted widely with businesses in all sectors across Northern Ireland. To put their experience in context, some of our SMEs who employ less than 200 people have calculated additional wage bills equating to hundreds of thousands of pounds, with larger businesses reporting six-figure rises.
Most are struggling to ascertain where that money will come from, during a time when the need to invest in skills, automation, digitisation and decarbonisation cannot be ignored. For those trading in a globally competitive marketplace, who are already responding to lower demand, passing on the cost could be detrimental to their competitiveness.
Add these pressures to the existing cost pressures that businesses were already facing from energy, wages, raw materials and the cost of borrowing and you get a clearer picture of why this budget is so difficult for them.
We are also aware of the concerns of private businesses including farmers, in respect of the impact of changes to IHT property reliefs. This could have disproportionate consequences for Northern Ireland because of the number of family-owned firms and farms here. NI Chamber will ensure that the NI business voice is heard during the forthcoming consultation on this change.
In light of the level of concern raised about the Budget, last week NI Chamber wrote to the First and Deputy First Ministers to request an urgent meeting to discuss the implications for businesses of all sizes.
While we welcome the additional funding that has been made available to the NI Executive for this year and the next fiscal year, businesses need confidence that the additional money raised by increased business taxes will result in the material delivery of speedy public service transformation.
The Chancellor announced a wide range of initiatives designed to incentivise economic growth across the UK in high-growth sectors like defence, aerospace, life sciences and clean energy. We must ensure that Northern Ireland gets its fair share of this. It is therefore imperative that the Executive moves swiftly to publish its draft budget so that we can start delivering greater certainty for people and businesses in this region of the UK.
There is no denying that this budget is difficult, but among the tough announcements, there was some welcome news too. The decision to lift the pause in funding for City & Growth Deals in Causeway Coast & Glens and the Mid South West is welcome. So too is confirmation of £270 million for capital investment, which should be directed towards acute infrastructure challenges like wastewater and decarbonisation.
None of us should lose sight of the ambition to design a globally competitive and sustainable economy in Northern Ireland. To safeguard that, in the immediate term we must all turn our attention to making sure that as a region, NI does not fall behind relative to the rest of the UK.
The NI Executive holds many of the levers. So, with a draft Programme for Government published and a draft investment strategy and budget to follow, it is imperative that we work in partnership to ensure that our businesses thrive, the economy grows and public services deliver for people and communities across the province.
This will take long-term thinking, a government determined to drive, generate and incentivise growth in the economy and above all, a joined-up effort to deal with the challenges head-on.
