Local Business Reaction to the Autumn Budget: Andrew Lowson
Post Autumn Budget, businesses are focused on how to accommodate national insurance rises, but in the short-term consumers are continuing to spend, on food & drink in particular . . .
Hopes for a magical economic reset seem to have been stalled by the latest government budget and the resulting economic forecasts. National insurance hikes to be funded by businesses is the major headline, and how it will negatively affect sectors such as hospitality has been well documented. Staff rotas are likely to be run lean to absorb the cost, meaning pressure on staff and impact on customer service – that is good for no one.
From speaking to businesses in York, it’s going to have a serious impact across sectors; one small professional service company put the cost at £400k a year. A major brewer also told me that significant saving cuts will be announced in the new year, so we better brace ourselves for some bad headlines at the start of 2025. Some sectors are benefiting from the budget, with many solicitors doing succession planning! However, frustration will grow from the business community if, firstly, they don’t see public projects taking effect and, secondly, stifled employee remuneration packages negatively affect consumer confidence.
A recent presentation in York by HSBC’s UK Economist Emma Wilks showed public sector growth outstripping private in the coming years, which is not sustainable. It highlighted that, as things stand, further tax rises will be required in two years’ time to continue to fund public services. How this will be funded is unclear, but neither businesses nor households will fancy footing the bill, so Number 11 Downing Street will have a hard sell either way.
People in York are eating out, which is helping out!
Let us not forget that economists can often get things wrong – just ask Lizz Truss and Kwasi Kwarteng! The most recent spend data we have in York demonstrates sales transactions were up +5.8% in October 24 compared to October 23. The rest of the UK was -4.3% down, so a great result for city businesses.
York’s food & drink sector continues to attract the largest share of spend, accounting for over 38% of the total monthly spend. Year-on-year, the food & drink sector saw an increase in total spend of +8.0% in October 2024 and +11.3% in March 2024, coinciding with the BID’s biannual York Restaurant Week. Comparatively the sector grew nationally in October by just 0.9%.
Table for York, showing year on year sales for October 24 vs 23 and YTD sales by sector (source Beauclair)
On the flip side, entertainment (covering leisure and attractions) has seen a big dip in spend this year – 18% down year to date compared to 2023 and multiple York attractions have told me this year has been hard. Maybe this is people choosing holidays abroad after two miserable summers, or a sign of consumers being more discerning on how they spend their disposable income?
Read more about York’s economic performance in our latest City centre Insights Report.
There are BIG local talking points, where businesses will want to know their views are understood
We’ve been encouraging businesses to have their say in City of York Council’s recent Big Budget Conversation. There are proposals on steep rises in city centre car parking charges, alongside questions around a potential tourism tax. I hope that Councillors carefully listen to businesses, especially on the car parking. Although tourists may pay a premium for experiences like the Christmas Markets, someone local wanting to use the city centre for a few hours on a Tuesday morning could well be put off by a prospective £9.70 fee. The BID has long suggested the idea of dynamic pricing. Compromises must be found, and we’ll be having immediate talks with the Council.
On a more positive note, the BID has long championed developments such as the Coney Street Riverside and York Minster Centre for Excellence. In October, the Coney Street redevelopment was granted planning permission and just last month, the Centre for Excellence was completed to start training stone masons of the future! These high-profile regeneration projects are key to enhancing our economy and visibly demonstrate progress. In the last few days, Angela Rayner, the Housing Secretary, has highlighted plans to overhaul the planning system that could give direct powers to planning officers, by-passing local politicians. York famously has not had a local plan for housing since the 1940s – a good example of the ‘chaos’ Rayner cites. Let’s hope that City of York Council can produce a local plan imminently, as it shouldn’t need emergency powers to get consensus. We need opportunities for our young people, and the right mix of housing and business regeneration is key to that. So let us hope the funding going into the public sector can make a difference and help us achieve our local goals.