The 2024 Autumn budget introduced by Chancellor Rachel Reeves has prompted a mixed but cautious response from the Rcapital portfolio. While some measures are appreciated, many businesses expressed concerns over the increased cost burden and potential impact on hiring, growth, and overall competitiveness.
Concerns Over Rising Costs
A common theme across the feedback is concern about the rise in employer National Insurance Contributions (NICs). Companies highlighted that this increase, coupled with the higher National Minimum Wage, places a significant financial strain on already tight margins. One company estimated an additional annual cost of £100,000 due to the NICs hike, which directly impacts their capacity to invest and grow.
Sector-Specific Implications
Some businesses noted that certain sectors, such as aerospace manufacturing, which already operate with slim profit margins, would feel the effects more acutely. Others highlighted the inflationary impact of these changes, expecting a ripple effect on pricing strategies and customer behaviours.
Relief for Smaller Firms
The raised employment allowance and targeted support for retail, hospitality, and leisure businesses were welcomed, particularly for smaller firms. However, companies flagged that these measures might create disincentives for growth by imposing sharp thresholds that penalise businesses as they scale.
Market and Customer Impact
While many companies anticipate limited immediate changes in customer demand, there is a general concern that the broader economic environment, shaped by higher taxes and inflationary pressures, could dampen consumer spending in the medium term. Some portfolio companies plan to adjust their pricing strategies to offset rising costs, potentially risking customer retention.
Looking Ahead
Rcapital portfolio businesses acknowledge the government’s focus on infrastructure spending and investment in public services, recognising their long-term benefits. However, there is scepticism about whether these gains can sufficiently offset the immediate challenges posed by the tax and policy changes. The sentiment is that the government must act decisively to deliver on its industrial strategy and unlock business confidence.
In summary, the budget is seen as a balancing act—investing in future growth while imposing short-term challenges on businesses. The success of this approach will ultimately depend on how effectively the government supports businesses navigating this transitional period.