What do East Anglia’s businesses need from the Autumn Budget?

Confidence is crucial for investment and growth

For many businesses, the current challenge is not simply the prospect of a particular tax change. It’s the difficulty of knowing what the tax, employment and regulatory environment will look like in two or three years’ time.

As Chris George, Tax Partner says, uncertainty is currently one of the biggest risks facing businesses.

“Long-term plans cannot be relied upon with the current level of uncertainty. Stability and calm will help unlock growth.”

Many clients are expecting tax rises in one form or another, including possible changes to Capital Gains Tax or reliefs. But his hope is that the Budget delivers greater certainty instead, allowing businesses to plan with more confidence around hiring, property moves and capital investment.

This is something that’s echoed by our corporate finance specialists, who are seeing businesses hold back on significant investment decisions because they don’t know what the future environment will look like.

And for owner-managed businesses, this can affect everything from succession planning and business sales to investment and expansion. As Luke Morris, Corporate Finance partner highlights:

“The overwhelming concern is confidence. Many businesses are not hiring. Many business owners are sitting on significant investment decisions but are reluctant to commit because they do not know what tax, employment and regulatory environments will look like in two or three years’ time. Merger & Acquisition markets remain active, but transactions are taking longer as buyers and sellers become more cautious.”

The message is not necessarily that businesses need more incentives. In many cases, it’s simply that they need stability and certainty to make decisions.

What does this mean for landlords and property investors?

Property investors are facing their own combination of tax, financing and regulatory pressures.

Sam Stent, Tax Partner works closely with landlords and property businesses across Suffolk, Essex and Norfolk and says there is significant concern around the prospect of further changes to Capital Gains Tax, SDLT or property taxation.

“As someone who deals with a lot of property tax and SDLT matters, there are a huge number of landlords who are worried about the prospect of changes to capital gains tax, SDLT or property taxation. 

Over the years we’ve seen the restriction of tax relief for mortgage interest, the introduction (and subsequent increase) of the SDLT surcharge, the implementation of the Renters’ Rights Act and the 2% property tax surcharge, all serving to increase the tax, financing and administrative pressures on property businesses. 

I’ve had conversations with a number of clients who think that if further punitive measures are announced on 28th October, it will be the final straw for landlords and could well mean that property investment is no longer commercially viable.”

Sam believes businesses should look beyond the headline Budget measures though and pay attention to changes that could have a less immediate profile but a significant impact over time.

For East Anglia’s property investors, therefore, the Budget could be less about any one announcement and more about what the overall direction of travel means for future investment decisions.

Farmers and landowners continue to face pressure from all sides

For the rural economy, the pressures are particularly wide-ranging.

Jack Deal, Farms and Estates Partner, highlights what so many are acutely aware of:

“Our land-owning and farming clients are dealing with high energy prices, expensive labour, increasing borrowing costs, withdrawal of the Basic Payment Scheme and then a poorly rolled out Sustainable Farming Incentive, the continuing impact of Inheritance Tax changes, cost of living crisis hurting diversifications, climate change, drought… I could go on!”

And whilst acknowledging some of these pressures are outside the Chancellor’s control – others are not.

Jack would like to see a clear plan for bringing down UK debt, controlling Government spending, reducing the tax burden, simplifying the tax system and supporting UK food production and those managing the country’s environment.

For farmers and landowners, the Budget therefore needs to be considered alongside the longer-term policy environment. As Jack puts it, the rural sector is looking to the Government to “put the UK back on track” and wants to see it succeed.

Looking beyond the headline tax rises

Inheritance Tax is another area where families and business owners are having to revisit long-established plans.

Simon Hurren, Private Client Partner believes the Government should take account of the significant changes already made to the Inheritance Tax regime, including the forthcoming inclusion of unused pension funds and reforms to agricultural and business property reliefs.

“Many families are having to revisit well thought through and long-established plans because of these changes. In some cases, this could have an impact on the longevity of business and farms being passed down as funds may need to be raised to give sufficient liquidity to settle the liabilities.”

He also highlights how the continued freezing of tax thresholds is also increasing the number of families affected.

The wider economic picture

There are also concerns about the wider economic conditions in which businesses are making decisions as Luke Morris, Corporate Finance Partner explains:

“Corporate finance and business valuation are driven by confidence, investment and transaction activity. A pro-growth Budget could stimulate investment, acquisitions, fundraising and expansion projects. If owners feel more confident about future returns, they are more likely to invest and transact. That creates opportunities for businesses and advisers alike.

Conversely, if the Budget introduces further uncertainty, particularly around the taxation of wealth, capital or business ownership, we could see investment decisions delayed once again. Uncertainty has a cost. Businesses often respond not by making bad decisions, but by making no decisions at all.”

The impact of tax policy is not limited to businesses

Graham Doubtfire, Private Client Partner, highlights the effect of the £100,000 Personal Allowance taper and the interaction with childcare costs. He explains how these thresholds can influence decisions around working hours and promotions, including among senior professionals.

“At £100,000 there’s a cliff edge effect on childcare costs.  And therefore, employees that would otherwise drive growth are making decisions to work reduced hours, or not apply for promotions, because of the impact when income exceeds £100,000.  This is not just in the private sector, I hear the same from NHS professionals – it can’t be easy to reduce NHS waiting lists when the employees decide to work reduced hours or Senior Professionals decide not to apply for a promotion.” 

There is a similar issue at higher income levels, where pension contribution rules can affect decisions about how much people work and how they plan for retirement.

For Graham, these are examples of how tax thresholds can have wider economic consequences than simply the amount collected. The decisions individuals make in response can also affect the businesses that employ them and the local economies in which they spend their income.

What does East Anglia need from the Budget?

Across these different perspectives, there is a clear common thread.

The issues facing a farmer in Suffolk, a landlord in Norfolk, a business owner in Essex or an investor considering their next move are not identical. But the ability to make long-term decisions depends on having a reasonable degree of certainty about the environment in which those decisions will be made.

There’s strong support in the region for greater local decision-making – so if the government’s devolution plans give local authorities greater control over local taxes, this would arguably make businesses more likely to invest, expand or create jobs in East Anglia which would have a positive impact for the whole region.

Ultimately, the Budget will contain measures that affect different people in different ways. For both businesses and individuals, the value may lie not just in the individual announcements, but in what they tell us about the direction of travel.

Whatever the outcomes, our teams based in Ipswich, Colchester, Bury St Edmunds and Norwich can help you understand what the Budget means for your business, property, family or investments.