On 30 October, Chancellor of the Exchequer Rachel Reeves will deliver the Autumn Budget, accompanied by a complete fiscal statement from the Office of Budget Responsibility (OBR). A national budget always brings opportunities and challenges; this year’s financial outline is no different.
The Autumn Budget for 2024 comes amid global economic uncertainty, rising inflation, and ongoing challenges arising from recent geopolitical events. The Chancellor has laid out several measures to stabilise the economy, support growth, and enhance productivity across various sectors.
- Living Wage: The Labour manifesto pledged to increase the National Minimum Wage to make it “a genuine living wage” by including cost-of-living considerations under the control of the Low Pay Commission (LPC).
- Workers Rights: Proposals to rebalance “one-sided flexibility” include plans to ban “exploitative” zero-hours contracts, give workers a right to reasonable notice of changes to shifts and working time with compensation for cancelled shifts, and a right to regular work based on a reference period.
- Employers NI Increase: The Chancellor may consider an increase of 1% to employers NI, bringing the rate to 14.8% VAT on private schools: A 20% VAT on private school fees will be introduced across the UK starting 1 January 2025, with certain exceptions.
British Business Bank (BBB) reforms: The Chancellor is expected to reform the British Business Bank with the aim of increasing the funding opportunities available to SMEs.
- The Labour manifesto's pledge to increase the National Minimum Wage (NMW) to a "genuine living wage" could lead to increased wage costs for SMEs, especially in sectors like retail, hospitality, and care, where many workers are on or near the minimum wage. The consideration of "cost of living" in wage calculations could mean that wages rise faster in areas with higher living costs, putting additional financial pressure on small businesses to stay competitive.
- The proposed rebalancing of “one-sided flexibility” could make zero-hours contracts more regulated, with bans on exploitative practices. This means SMEs relying on flexible, on-demand workforces may need to rethink their staffing models, providing more predictable hours, compensation for cancelled shifts, and a right to regular work. The changes could lead to higher operational costs for small businesses that depend on flexible labour but may also help improve employee satisfaction and retention.
- An increase of 1% in Employers' National Insurance contributions (to 14.8%) would increase the cost of hiring for SMEs. This is especially impactful for small businesses with tight profit margins, as they may find it harder to absorb these additional costs without passing them on through price increases or reducing headcount. Employers may need to rethink their workforce strategies and budgeting to cope with this rise.
- Prepare for rising costs: Adjust financial plans and budgets to account for potential wage increases, employer NI contributions, and compliance with new workers' rights regulations.
- Evaluate staffing models: If you rely on zero-hours contracts or flexible labour, review your employment practices to ensure they align with the new proposals and consider providing more predictable hours to retain staff.
- Explore new funding options: Monitor British Business Bank reforms and other funding opportunities to secure capital for growth and innovation.
