Businesses and the general public have had a tense time of waiting from the election of the new Labour government on July 4th after 14 years in opposition until the Chancellor’s Budget Statement on Wednesday 30th October. It is fair to say that, at the very least, the policies unveiled have received a mixed reaction.
The transport and logistics sector membership association Logistics UK was quick to issue a release to the media on the same day welcoming one particular policy announcement. David Wells, Chief Executive of Logistics UK, stated:
“The Chancellor’s decision to freeze fuel duty for a further year is welcome news for the logistics sector. Nothing moves without logistics: the sector supplies our hospitals, schools, factories, shops and homes with everything they need, everywhere, every day. The sector is vital to any plans to stimulate growth across the economy, and this respite is welcome news for a sector already seeing increasing business failures over the last year.
“The sector operates on very narrow margins – often only 2.5% - with fuel representing a large proportion of the weekly operating cost for hauliers.
“Logistics powers every part of the UK’s economy – it is the UK’s system for growth – and today’s announcement should drive confidence in our sector’s ability to deliver for its customers with confidence.”
An increase in fuel duty had been anticipated by many and the fact that this has been deferred is a positive step for the logistics sector and its ability to offer competitive costs to its customers. However, transport and logistics companies and their customers share something in common.
We are all businesses wishing to grow in profitability in order to power the services we offer to users, reward the work and productivity of our employees and thereby benefit the UK economy and national wellbeing. So how has the 30th October Budget helped us and our customers deliver these goals?
Delivering for Business
It has been no surprise to any of us that this Budget would be difficult for any new government, especially with the pandemic and the international geopolitical crises that they and the previous administration have been obliged to deal with.
A post by Accountancy Age titled “Autumn Budget 2024: Industry Reactions” opens with the words: “Following the UK Budget announcement, key figures across finance, tax, and business have responded to the Chancellor’s measures, highlighting potential impacts on sectors ranging from mergers and acquisitions (M&A) to inheritance tax, pensions, and digital compliance. While some view the Budget as a necessary approach to fiscal challenges, others raise concerns about unintended consequences on investment, employment, and entrepreneurial drive.”
In a section subtitled “Employment Costs and National Insurance Contributions (NICs)” contributors echoed these concerns, including:
Richard Maitland, Head of National Employment Tax, MHA
“The Chancellor has announced a 1.2% increase in employers NICs and cut the threshold at which employers start paying the tax from £9,100 to £5,000. In conjunction with a 1.2 percentage point rise in National Insurance to take the employer rate to 15%, this will raise about £25bn a year.
“Our calculations highlight that the costs for business of the average employee on the minimum wage have increased over 10% today. Compounding this impact is that there are very few levers that employers can now pull to seek to mitigate these cost increases – although maximizing the use of salary sacrifice may be one.”
Derry Crowley, CEO, Xeinadin
“Changes to employers’ national insurance contributions were expected, but the slashing of the secondary threshold from £9,500 to £5,000 is reckless. Despite there being a relief for the very smallest of businesses, this will represent a massive hike in tax for the majority of the UK’s SME sector.
“The chancellor stated Britain was falling behind other countries in the race for new jobs, but raising national insurance contributions for employers is counterintuitive. Increasing the cost of UK based employees – and simultaneously increasing workers wages – makes the UK a far less attractive place for hiring new talent. It is the employers that will bear this cost. Whilst swallowing up the black hole in public finances, it will create a host of problems for the majority of businesses in this country”
Like companies and organisations in every sector of the economy, Relay applauds the government’s stated aim of promoting economic growth. In the meantime, however, there will be challenges that our customers will need to resolve, and we pledge that we will support them in every way through offering our advice, logistical expertise and the highest standards of service at competitive costs.