Hi Everyone.
Welcome to November 2024, which we enter on the back of the first Labour Budget in over 14 years. That’s why this newsletter is slightly behind the curve: I wanted to consider what impacts this fiscal event brings and how it might affect my clients.
What a statement it was taking over an hour to present. It was long, detailed, radical, risky, and much-briefed to avoid the market-melting impacts of the Truss/Kwarteng budget. This meant macro impacts were marginal, with a few basis points on Gilts and temporary dips in the FTSE and the value of Sterling on international markets. Overall, it’s not too bad; we’ve seen much worse, but we must monitor these measures going forward.
As the dust settled, we saw historic highs in taxation and higher borrowing levels via a fiscal rule change. But it was very much a statement of intent signalling the new government’s determination to stabilise and expand our indebted and tired economy after 14 years of Tory rule.
Equally historic, it was the first Budget delivered by Rachel Reeves, the UK’s first female Chancellor. Underpinning it all was Labour’s vision for growth based on equality of opportunity, devolved power distribution, innovation, and green energy.
As optimistic as the Budget seems in intent, like so much in life, it comes at a cost, and SMEs are now central to how the Chancellor will fund Labour’s economic mission. So here’s my summary and thoughts on the host of changes Reeves announced and what these might mean for you. Hold on to your hats!
Increase To Minimum Wage
Your employment costs are on the up. In April 2025, the minimum wage for people over 21 will rise to £12.21 per hour. Low-paid workers will see this as a welcome boost, particularly in the hospitality and retail sectors. However, owners in these sectors will see their profit margins squeezed as they attempt to absorb this and other costs.
National Insurance
From April 2025, a 1.2% increase in SME employer NI contributions kicks in, taking the rate to 15%. Reeves also announced a decrease in the employment allowance – from £9,500 to £5,000. This allows employers to reclaim some class 1 national insurance costs, but the threshold has been effectively halved. Despite this, Reeves calculated that 865,000 employers won’t need to pay National Insurance for employees next year, and approximately 1 million won’t notice any difference.
SMEs were in the process of recovering from a damaging pandemic and a cost-of-living crisis. So these changes went down like a concrete lifejacket. The airwaves filled with aggrieved small business owners (prematurely, perhaps) lamenting what was being called a “tax on jobs,” predicting a reduction in employment, business growth and, in some cases, apocalyptic end-of-business predictions. Let’s wait and see on that.
Fuel Duty
For a government keen on burnishing its green credentials, freezing fuel duty seemed out of sorts. This was a purely pragmatic decision to lessen impacts on logistics, transportation, and delivery-dependent businesses vital to the UK economy. As mentioned in the budget statement, work is starting on the infrastructure to clean up private and public transport. So, when this infrastructure is in place, we can expect fuel duty to accelerate.
Business Rates
There were no significant changes to business rates, although hospitality, leisure, and retail sectors will continue to benefit from a 40% business rate relief until permanent lower rates kick in by 2026. This discount remains a welcome lifeline for businesses still hampered by pandemic-related losses, allowing them to weather future economic challenges.
Corporate Taxes
Corporation tax stays at 25% with no change planned in this parliament, so there is no need to make adjustments in this area. Indeed, the government published a Corporate Tax Roadmap that outlines plans to support capital investment in areas like R&D, full expensing, and a £1 million annual investment allowance. The aim here, I think, is to bolster long-term investment by building medium-term business confidence. But how much use this will be to the average SME is, to my mind, debatable.
A Budget For Growth?
Despite all the above, the OBR’s forecasts showed relatively anaemic growth projections. SMEs seem to be paying a high price for relatively modest returns. I suspect the Treasury will fine-tune these policies as the medium-term implications emerge and national finances reshape.
Your reaction to this will undoubtedly depend on your political views, business profile, or how highly you prioritise having well-functioning reliable public services.
Some have lauded this fiscal event as one of the most consequential ever. But as you saw from Rishi Sunak’s furious Budget response, some regard it as a betrayal of Labour’s promises to protect “working people” in their election campaign.
The Chancellor has dealt the cards for good or ill, so we’ll see if she wins, loses or draws. Whatever happens, she’s staked a whopping £70bn on the upside. That’s a bold bet by any measure.
As for me, I’ll keep an open mind and closely monitor how it plays out. These are just the headlines, but many other SME-relevant aspects appear in the weighty budget statement, such as R&D support, investment incentives, and CGT, which I’ll look at in the future. Stand by on that.
In the meantime, if you need the Enso team to descend the bat pole and update your budgets and business plans in light of all the above, contact us on the usual channels, and we’ll get to work.
Empowering Your Business With Our New Finance Funding Solutions
While we’re discussing all things finance, it’s an opportune time to announce an addition to the Enso service portfolio. I’ve partnered with Armani Richards, who will work with me as Enso’s Head of Business Modelling, providing integrated cashflow forecast modelling and advisory services to SMEs seeking growth funding.
We aim to provide tailored financing solutions designed to meet the unique financial needs of your business. With a commitment to flexibility and reliability, we offer a range of funding options, from structured loans to HMRC-specific financing, ensuring seamless support for your cash flow and growth ambitions. Areas we can help with are:
Business Loans
Access structured loans to drive expansion, manage operational expenses, and capitalise on new growth opportunities.
Commercial Mortgages
Whether you’re purchasing, refinancing, or expanding a property portfolio, we provide funding for owner-occupied business properties, single commercial investments, or diversified property portfolios.
Invoice Financing
Release immediate cash against outstanding invoices, ensuring consistent cash flow to support your daily operations.
VAT & HMRC Loans
Stay compliant and reduce stress with tailored loans that cover your VAT and HMRC obligations.
Custom Finance Solutions
Enso Finance goes beyond conventional funding with bespoke solutions that align precisely with your business goals and financial structure.
Armani’s expertise in these areas dramatically enhances the Enso brand. I’m delighted to offer more innovative ways to help my clients and show that finance is not all P&Ls and balance sheets in the modern business world. Adding Enso Finance shows that my company is a full-service one-stop shop for all your business finance needs.
Remember, Remember The Fifth Of November
It’s nearly time for a bonfire allied to a treasonous plot. No, not of the Guy Fawkes variety we enjoy in the UK, but perhaps the immolation of American democracy. Yes, 5th November is the US presidential election; whatever happens, it’ll be a bumpy ride.
A Trump win means we’ll have a thin-skinned, vengeful man in the White House who has already declared war on Kier Starmer. As America turns inwards, the US political establishment will likely be turned upside down, scores will be settled, and international focus will be lost.
While a Harris win may be more palatable to many, her opponent will not take the result lying down. Not a chance. Who knows what Donald and his supporters will do to snatch power from defeat? It could be game-changing.
If all this wasn’t so consequential for the world’s economy and security, we could all get some popcorn and enjoy the show. Alas, we can’t influence any of this. And even Rachel Reeves’s budget plans may go awry depending on the outcome. Ho hum…
Good luck everyone
All the best
Adam