Chancellor caught between squeezed households and struggling small firms

This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news

The Chancellor is walking a tightrope, and rising inflation has made the balancing act harder. Households need help with their bills, while businesses warn that another increase in their costs could undermine their ability to keep trading.

Inflation rose to 3.5% in September, up from 3.1% in August, according to figures released on 21 October. Higher petrol and diesel prices helped drive the increase, adding pressure ahead of the Budget on 28 October.

Pressure behind the bar

Hospitality illustrates the problem. Customers watching their spending leave pubs with limited scope to raise prices, even as the cost of serving them increases.

Greene King finance chief Jonathan Fearn says inflation has added £400 million to the company’s costs since 2019. Hourly pay has risen by more than 60%, utilities bills by half, and its annual business rates bill stands at £60 million across 1,500 managed pubs.

Those are the figures of a large operator, rather than a measure of every independent pub’s experience. But smaller businesses can face similar pressures with fewer reserves to absorb them.

Fearn also cites British Beer and Pub Association research suggesting pubs retain just 12p profit per pint sold. That is an industry estimate, rather than a Greene King profit figure, but it illustrates how little room there can be for another cost increase.

Relief comes at a price

The sector wants action on VAT, employer national insurance and business rates. Fearn has called for hospitality VAT to fall from 20% to 10%, while hospitality and retail employers have sought changes to national insurance costs to support recruitment.

For the Treasury, substantial tax cuts would require funding or acceptance of lower revenue. For businesses, leaving existing pressures untouched also carries consequences: delayed investment, fewer recruits and difficult decisions about opening hours.

Helping households and helping businesses are connected. Customers need spending power, but they also need viable local employers, shops, cafés and pubs.

Promises will not pay the bills

A cautious Budget with targeted support is one possible outcome, rather than a settled decision. Until the Chancellor delivers his statement, predictions about tax rises and relief remain predictions.

Small firms will judge the result by what it changes in their accounts. A modest concession offers little breathing space if other measures swallow the saving.

The Chancellor must protect the public finances while recognising that business survival supports employment and future tax receipts. Getting that balance wrong could leave households needing more help while the firms providing their jobs become less able to offer it.

This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news

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