Family businesses have been ‘thrown to the wolves’ by Chancellor’s mini-budget despite huge tax cuts

Family-run businesses have been ‘thrown to the wolves’ by the Chancellor’s ‘mini-budget’ despite Kwasi Kwarteng unveiling the biggest package of tax cuts in 50 years, it has been claimed.

Mr Kwarteng declared his plans ‘for growth’ as a ‘new era’ for Britain as he unveiled cuts to income tax and stamp duty and a scrapping of a planned rises in business taxes.

Cheered by Tory MPs, the Chancellor said his tax cuts would ‘turn the vicious cycle of stagnation into a virtuous cycle of growth’.

Mr Kwarteng’s plans were hailed as ‘probably the most pro-business budget this century’ but industry chiefs. 

But fears have been raised the announcement did not go far enough do tackle the financial crisis facing family businesses, which have struggled through years of turmoil following the pandemic, war in Ukraine and now the cost-of-living crisis. 

Sacha Lord, night time economy adviser for Greater Manchester. condemned the mini-budget during a furious flurry of tweets after Mr Kwarteng’s speech.

He wrote: ‘Speechless. No VAT or Biz Rate support for Hospitality. Corporation tax cuts are completely useless if businesses aren’t turning a profit, or worse, closed.

‘These announcements will now mean last orders for thousands of Hospitality businesses meaning mass redundancies.

‘I’m absolutely clear. This Gov’t is just about big business, corporations and the fat cats. They have just sent a strong message to the Hospitality industry: They don’t care. They have just thrown small family run businesses to the wolves.’

Fears were also raised by leaders of the UK’s live music industry who said the Chancellor’s financial plans offered ‘little’ to help struggling venues battling to survive the cost-of-living crisis.

The chief executive of Live, which represents the UK’s live music sector, said businesses that are struggling already could ‘face bankruptcy and closure’.

Jon Collins said: ‘While we are pleased to see the Government taking steps to alleviate the cost-of-living crisis, today’s announcement delivers little for the UK’s world-leading live music industry.

‘Jobs are already on a knife edge, and we agree with the Chancellor that there are too many barriers in sectors like ours where the UK leads the world.

‘Combined with the impact of reduced public spending power and rising costs across the supply chain, businesses that are already struggling to turn a profit will face bankruptcy and closure.

‘Only the emergency measures that we have suggested to Government will prevent this – injecting cash into the bottom line of struggling businesses through a reduction in VAT on ticket sales, as well as major reform of business rates.’

Michael Kill, chief executive of the Night Time Industries Association (NTIA), said he was ‘extremely disappointed’ with the Chancellor’s announcement.

He added: ‘It will be seen as a missed opportunity to support businesses that have been hardest hit during this crisis, causing considerable anxiety, anger and frustration across the sector as once again they feel that many will have been left out in the cold.

‘We have been extremely clear with the Government that the Energy Bill Relief Scheme, even with the announcement of the limited tax cuts on national insurance, corporation tax and duty, is unlikely to be enough to ensure businesses have the financial headroom to survive the winter, especially with yesterday’s announcement of the rise in interest rates from the Bank of England.”

He added: ‘I would urge the Chancellor and Government to reconsider these measures, given the limited impacts of the current tax cuts on the immediate crisis for many businesses across the sector, the extremely vulnerable position the night-time economy and hospitality sectors remain in, and re-evaluate the inclusion of general business rates relief and the reduction of VAT within these measures.’

But the head of the Federation of Small Businesses (FSB), which represents traders across the UK, insisted the Chancellor’s cash plan was good news. 

Martin McTague, FSB national chairman of the Federation, said: ‘The Truss Government is off to a flying start. The Chancellor has delivered pro-small business measures today and has rightly recognised that removing taxes on jobs, investment and entrepreneurs is essential for our economy.

‘Ministers need to be relentless in removing barriers to small business success – especially with the current headwinds.

‘The Government has today signalled its determination to back small firms and we look forward to working with Ministers and departments to put in place measures to help small businesses grow and succeed.’ 

Commenting on the retail and hospitality implications of the mini budget Lisa Hooker, from accountancy giant PwC, said: ‘Retail, consumer and leisure companies are facing a perfect storm of headwinds with a likely contraction in real consumer spending and inflation across the cost base; not just energy but wages and commodities together with volatility in currencies.

‘Any help to boost spending or contain costs is therefore welcome. The tax reductions and investment for growth should help the consumer longer term and short term energy cost support is important but the sector is still waiting to hear about any other cost measures such as business rates. They will be holding their breath until the main budget given the risk around increasing rates from inflation.

‘The reintroduction of VAT free shopping for overseas visitors will be a much welcome measure for retailers particularly given the reduction in overseas visitors to our tourist shopping areas, providing a much needed boost for our important high streets.”

Eleanor Scott, hospitality and leisure director and strategy at the firm, added: ‘The hospitality sector has been hit by wave after wave of challenges, with multiple cost pressures pre-Covid, some of the severest operating restrictions of any sector during the pandemic, ongoing staffing challenges and now high inflation and the prospect of a consumer downturn.

‘UK hospitality has reported that three in five operators are not currently profitable and around 20 per cent are concerned about surviving the coming period. In that context, the support measures announced will be very welcome.

‘The alcohol duty freeze will be welcome to the hospitality industry, and give some much needed support as it faces challenges from more cautious consumer spending, ongoing staffing challenges and inflation across its cost base.’

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: ‘This is a great budget for business owners. However it’s a growth-gamble. If it works, we could avoid a recession but if it doesn’t we will add billions to the national debt and lose confidence on international markets. ‘

Mark Robinson, managing director of Southampton-based Albion Forest Mortgages said there were some ‘great announcements’ for the housing market, ‘if slightly short-sighted’.

‘In my opinion the changes have been long overdue as house prices have soared,’ Mr Robinson added. ‘With the higher rate of tax being scrapped, it will be interesting to see what moves lenders will make in the coming months.’