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Are UK businesses scared of Rachel Reeves's Autumn Budget? | Bonds & Ballots
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Oct 30, 2024
Is business scared of Rachel Reeves? And should it be? City bosses have been sounding the alarm in recent weeks as Labour prepares to deliver its first budget in government. The Chancellor’s fiscal plans could set the tone of British politics for the next decade and scores of business leaders have warned a series of rumoured tax hikes could dissuade investment and threaten the appeal of the UK as a place to run a company. But are the concerns founded? And what potential policies are spooking businesses the most? City AM’s City Editor Charlie Conchie takes a look at all the alarms in the run-up to Labour’s first budget. Get more of City AM 👇 🌐 http://www.cityam.com X(formerly Twitter): http://twitter.com/CityAM Facebook: http://www.facebook.com/cityam Instagram: http://www.instagram.com/city_am LinkedIn: www.linkedin.com/company/cityam
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one year ago Rachel Reeves and her then
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Shadow City Minister tudip Sadi were
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prowling the streets of the city on what
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had been jokily dubbed the scrambled egg
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and smoked salmon offensive in the
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square mile they were looking to charm
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Executives over breakfast put forward a
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more Pro bus Pro Commerce version of
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Labor and reset the party's relationship
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with the private sector after a
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fractious few years under Jeremy Corbin
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and it was for all intents and purposes
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a resounding success the party won the
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backing of scores of senior leaders and
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City types Labour's business events were
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stacked full of movers and shakers and
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the party pledged to treat the city and
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business as an engine of the economy
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rather than a cash cow to be squeezed
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for taxes that mood however has soured
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somewhat over the past few weeks as
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Reeves now gears up for her first budget
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as Chancellor on the 30th of October
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fear and loading are gripping the city
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and nervousness has taken hold while the
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government did wrestle back some control
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of that narrative with a splashy
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investment Summit commitments of
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billions of pounds from Global Investors
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questions are still hanging in the air
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over its tax plans investors and
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Executives around the country are now
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fearful of a punishing tax squeeze on
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the city at the budget at the end of
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this month but are they right to be
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scared I'm Charlie Ki Chief City
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Reporter at city am back with another
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episode and a new series of bonds of
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ballots where we'll be asking is
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business scared of Rachel Reeves and why
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the mood among City bosses and investors
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has been pretty fractur over the past
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few weeks while Rachel Rees has
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committed to ruling out hike in
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corporation tax for the duration of this
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Parliament there are a few measures
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still on the table that are spooking the
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city and businesses three particular
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taxes do appear to be the primary
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concern for companies one is a lift in
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capital gains tax which is the charge
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paid when selling an asset that has
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increased in value the current rate of
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capital gains tax sits at 20% for top
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rate taxpayers on all assets outside of
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residential property investment fund
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managers meanwhile pay 28% on the
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personal profits they make from the sale
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of assets so-called carried interest the
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government has already confirmed it will
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lift the charge paid by fund managers
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from its current rate of 28% this could
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be pushed to between 30 and 40% on other
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areas like shares and non-residential
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property however it's unclear what the
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government's plans currently are there
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are fears that the treasury could
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dramatically push up the rate of capital
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gains tax and damage investors appetite
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for holding assets like shares with the
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KnockOn effect of that being the
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entrepreneurs and investors no longer
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have the same incentive to operate and
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invest in the UK this also comes as the
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treasury is reportedly mulling plans to
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remove an inheritance tax break on
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London's junior stock market aim that
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tax break has been one of the big
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incentives to invest in the smaller
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unlisted and riskier companies on the
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aim market and it lies shares in those
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companies to be passed over after death
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free from inheritance tax by removing it
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there are fears that as much as6 billion
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could be sucked out of the market and
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stocks could dive as much as 30% all
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this after 15 years in which the number
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of companies listed on AIM have
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plummeted and money has been sucked out
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of funds investing in that particular
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Market rounding off that Trio of big
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concerns for business is a potential
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rise in National Insurance contributions
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for employers labor campaigned on a
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pledge not to hike National Insurance
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contributions but they say they meant
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for employees or working people as they
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put it for companies however that door
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has been left well and truly a jar that
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would most likely come in the form of
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National Insurance contributions on the
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money that businesses pay into to staff
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pension part and might raise around 17
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billion for the treasury's coffers but
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it is yet another bill on the list for
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business the prospect of those tax plans
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has spooked business in the runup to the
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budget but is this all threet without
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substance should business and the city
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of London actually be as concerned as
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some of those loud warnings suggest I've
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gone to ask Callum Pickering Chief
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Economist at PE hampt for his source is
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the city nervous about the budget yes
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there's a sense of forboding uh the
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problem that we've had is you've just
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had a long time to speculate since the
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election right up to this date and if
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you're left too long to think well you
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start worrying about the worst there are
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some specific areas where I think the
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market should be concerned um how
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government might treat capital gains tax
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whether or not they'll remove
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inheritance tax relief this could hurt
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specific parts of the market but broadly
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speaking we know a lot of what's in the
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budget we know the government won't
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raise Corporation taxes it won't raise
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income taxes or national insurance or
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change vat that's more than 70 % of the
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tax base a lot has already been signaled
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on spending including the potential to
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increase investment through a little
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borrowing so what I think we're facing
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is a bit of an event horizon risk which
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probably is somewhat overblown with
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brexit with the EU negotiations with
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some of the elections that we've had it
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paid to just wait to see what kind of
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world you're in but I don't think this
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budget presents such a serious economic
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risk that you should be holding off
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investment in the UK at large that
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pressure from the business Community
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points to the unenviable typ rope that
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the government has to tread try to
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create a world leading business
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environment on the one hand while
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filling what Rachel ree has called a 22
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billion pound black hole in the public
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finances alongside that there's a
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package of City reform that includes
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everything from unleashing a wave of
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cash from the city's Pension funds
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stripping back unnecessary regulation
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and tempting more companies onto
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London's markets but is balancing the
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two actually possible and crucially has
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business lost confidence that labor is
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on its side well certainly I was at the
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labor Party Conference listening to
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Rachel reev speech this time last year
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and you could hardly move you couldn't
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even many people couldn't even get into
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the room so much so there was so many
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Business Leaders trying to um hear her
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speech then of course we have the
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election and there has been a bit of a
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vacuum there has been a bit of
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criticism understandable in many ways
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that really the chance has waited too
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long to deliver the budget because
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between the election and the budget
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there's just been a lot of speculation
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swirling and if you look at the business
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surveys particularly those that have
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come out in September they do show that
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business confidence has been dented
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however this may end up being temporary
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once we do finally have H A grasp of
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what the playing field is going to be
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looking like post October the 30th that
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that will reassure businesses I think to
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some extent and provide some more
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certainty because that's what they
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haven't got at the moment and of course
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we know businesses don't like
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uncertainty it's very difficult to
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operate in that environment harre
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landland is obviously a business that is
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going to be very much affected and
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impacted by what is in the budget huge
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base of retail investors in the UK
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biggest in the UK what would har landan
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as a company like to see there to you
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know fuel some investing get people back
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into the stock market well it's really
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great to see the uhal naal wealth fund
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being established to try and draw in uh
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more investment into the UK but let's
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not forget the power of the retail
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investor largely untapped uh because
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we're enthusiastic holders of UK
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equities when retail investors uh do
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invest 75% of the trades carried out on
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the HL platform are in the London market
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and so that is offering real capital for
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UK B based businesses to grow and help
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achieve the growth Rachel Reeves and
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kiss Dharma is talking about but to do
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that they need to be incentivized so
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there's a lot of talk about increasing
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capital gains tax for example that's not
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necessarily going to be an incentive for
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people who are investing outside of
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their uh tax wrappers so we'd like to
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see the cgt allowances raised they've
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not been this low since the early 1980s
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also um stamp Duty why should be those
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retail investors be penalized for
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trading in UK uh B shares when they're
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not if they trade in overseas companies
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as well so let's try and look at ways to
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incentivize this Army of retail
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investors who really could uh boost the
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UK's growth by getting involved in the
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stock market at the same time building
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their financial resilience it is a
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tricky cocktail of pressures now facing
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Rachel Reeves and K as they approach
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their first budget in government they on
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the one hand say they've been left with
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a 22 billion pound black hole in the
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public finances and business on the
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other is fearful that it is now going to
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be the target of a punishing tax raid
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whether those fears are founded however
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we'll just have to wait and see let us
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know what you think in the comments
9:13
below should business be worried as we
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approach Labor's first budget in
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government
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[Music]
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