According to a poll by the Institute of Directors, two thirds of business leaders believe the Budget will impede their growth ambitions due to necessary cuts in pay rises, recruitment, and investment. Business confidence has plummeted further since Rachel Reeves’s speech, with Roger Barker, director of policy at the IoD, stating: “By imposing significant new tax burdens on business, the Government has taken a major risk with the economic recovery.” The Chancellor’s £40bn tax increase package, primarily affecting employers’ National Insurance contributions, is expected to raise hiring costs significantly. Paul Falvey from BDO highlighted that sectors like retail and hospitality are particularly vulnerable, with some businesses potentially facing financial distress.

The UK’s manufacturing sector experienced its first contraction since April, with the S&P Global UK manufacturing PMI survey recording a reading of 49.9 for October, down from 51.5 in September. This decline was attributed to a drop in new orders, driven by a “lack of market confidence” as firms adopted a “wait-and-see approach” ahead of the Government’s Budget announcement on October 30. The survey also highlighted a decrease in demand from both domestic and export clients, marking the 33rd consecutive month of falling export orders. Despite the contraction, manufacturing employment increased for the third time in four months as companies hired more workers to manage backlogs.

Concerns have been raised over the future of Business Asset Disposal Relief, previously known as Entrepreneurs’ Relief. Currently valued at a maximum of £100,000, this relief is set to decrease to £60,000 in two years, alongside a significant cut in the annual tax-free allowance for capital gains from £12,300 to £3,000. Chancellor Rachel Reeves said the Government is “committed to creating a positive environment for entrepreneurship,” yet many entrepreneurs fear that the erosion of this relief will make the UK less attractive for starting and exiting businesses. Paul Falvey, a tax partner at BDO, says that over the years the tax break has proved to be “a very valuable relief for business owners,” while Matthew Emms, BDO’s head of share plans and incentives, said that even with the erosion of the tax break, it remains attractive for employees.

Several prominent tax and wealth advisors have expressed grave concerns over the Government’s decision to abolish the non-dom regime, labelling it a “monumentally stupid decision.” The changes, set to take effect in April 2025, will replace the current system with one based on residency, which may incentivise short-term visits but discourage longer stays. James Quarmby, founding partner at Stephenson Harwood, noted that “dozens and dozens” of his clients are likely to leave due to these reforms. The Budget also included a temporary repatriation facility extension, which was welcomed by some, but overall, the reforms are expected to have a significant impact. Leslie Macleod-Miller, chief executive of Foreign Investors for Britain, warned of severe economic consequences from the anticipated exodus of wealthy individuals, stating: “This exodus will have severe consequences for our economy.”

Changes to inheritance tax announced by Chancellor Rachel Reeves have raised concern among family businesses, particularly in the farming sector. The scrapping of tax relief means families inheriting farms valued over £1m will face significant tax liabilities. Business relief will now only apply to the first £1m of shares, with a 20% tax on the remainder. The Family Business Research Foundation says business relief is crucial for family businesses – which account for around 86% of the private sector – as it allows for smooth succession from one generation to the next without the need to use large sums of the business’ money or sell key assets to cover tax bills.

By 2028, an estimated 15% of British adults will be classified as higher-rate taxpayers, according to analysis from the Institute for Fiscal Studies (IFS). This increase will see 9m workers paying 40% or more in income tax, up from 6.5m today. Chancellor Rachel Reeves’ decision to maintain a freeze on income tax thresholds for an additional three years will result in over two-thirds (67%) of adults paying income tax. Currently, 11.8% of the population pays the higher 40% rate or the 45% additional rate. The IFS report takes into account the Office for National Statistics’ population growth predictions alongside Office for Budget Responsibility projections.

Experts have warned that the recent increase in employers’ National Insurance contributions will disproportionately affect women. The Institute for Fiscal Studies highlighted that “in proportional terms, the employer NICs reforms do have a bigger impact on those on low earnings than those on middle or high earnings.” With the threshold for employer contributions dropping from £9,100 to £5,000, hiring lower-paid workers will become more expensive, increasing costs by 5.4% compared to 2.5% for average earners. Approximately 59.5% of low-paid jobs are held by women, exacerbating the existing gender pay gap, particularly for those aged 40 and over.

The UK has been made less attractive to US businesses looking to invest in Britain due to Labour’s increase National Insurance (NI) costs, according to the chief executive of British American Business. Duncan Edwards said: “For the UK leaders of American-owned companies looking to get more investment from their head office, their task has definitely just become more difficult as the costs of doing business in the UK will rise. Coupled with the Employment Rights Bill, this will make the UK less attractive for big American employers.”

Rachel Reeves will look to overhaul Britain’s pension fund industry, with the Chancellor understood to see the appeal of Canadian-style pension reform which would involve merging Britain’s local authority pension schemes.

A Treasury scheme aimed at improving small business access to finance has been labelled a “total failure” after an official review revealed that it successfully secured loans for only 5% of businesses referred to it. Established in 2016, the bank referral scheme requires nine major banks to redirect small businesses denied loans to independent platforms, which are supposed to help them connect with alternative lenders. However, the review found low referral numbers, with only 5,387 deals arranged, totalling £128m – significantly lower than anticipated given that SME bank lending in the last quarter alone was £4bn. Although the Treasury acknowledged that the scheme’s conversion rate fell short of expectations, it claimed the initiative still “helped to better inform businesses of the finance options available to them.”

Ryanair’s chief executive, Michael O’Leary, has announced a 10% reduction in flights to and from UK airports next year, attributing this decision to Labour’s planned increase in air passenger duty (APD). O’Leary stated that the tax rise would make air travel “much more expensive” and could result in five million fewer passengers at UK airports. He described the tax increase as a “short-sighted tax grab” that would hinder the UK’s competitiveness compared to countries like Ireland and Sweden, which are abolishing travel taxes to boost tourism.

Rachel Reeves’s Budget plan to increase borrowing has drawn warnings from ratings agencies S&P and Moody’s regarding the UK’s public finances. S&P described the fiscal position as “constrained” and noted that while increased spending could “mechanically boost growth in the short term,” the long-term effects remain uncertain. Moody’s expressed concerns that the policy presents “an additional challenge” to already difficult fiscal consolidation prospects, leaving the Government with a “limited buffer” against financial shocks. Reeves’s plan includes an increase in state spending by nearly £70bn annually, funded by higher taxes and borrowing, which has led to rising yields on government bonds. The Office for Budget Responsibility predicts a temporary boost to GDP from these measures, but warns of subsequent downgrades and increased pressure on inflation and interest rates.

Analysts expect the Bank of England to lower interest rates this week, with the Monetary Policy Committee (MPC) forecast to cut the base rate by a quarter-point to 4.75%. While forecasts suggest that last week’s Budget will push up inflation, official figures released in October boosted hopes of a rate cut as inflation fell to 1.7%, its lowest level since April 2021, and wage growth eased again to its lowest level in two years.

Sir Keir Starmer has attempted to quell market jitters with a piece in the FT seeking to assure investors that his government would seek to carry out reforms alongside its spending and borrowing plans. He claims tough fiscal rules will “lock in stability” while Labour’s “corporate tax road map” would “provide boardrooms with a stable and competitive framework for long-term investment.”