Prime Minister Andy Burnham built his early days in Downing Street around one central idea: ’breathing space’.
A VAT cut on electricity bills, the return of the £2 bus fare cap, a promise to make life more affordable for families who have spent years being squeezed. These are all welcome first steps, and they speak to a government willing to act at a time of cost pressures across the economy.
It’s not just households feeling the pinch at the moment. Businesses have also been under immense strain.
On a recent visit to Lancashire, I met some incredible companies from the manufacturing, construction, retail, and hospitality sectors. But they all told me how squeezed they felt by rising cost pressures. The picture that emerged from our conversations also reflected the consequences. One firm said it had previously taken on 25 apprentices, but this year, under the weight of mounting costs, it was hiring just one.
Unfortunately, that story is being repeated across the land, and I’m certain it will be familiar to many Labour MPs, who spend their weekends in their constituencies, listening to the people who run the local shop, the garage, the care home, the factory down the road.
Ahead of the budget, business owners are not asking for sympathy; they are asking for the same thing the Prime Minister has promised households: a bit of room to breathe.
And it’s vital that the Chancellor takes action to ease these cost pressures, because they are choking off any possibility of the sustained economic growth he wants to see.
The numbers explain why. British Chambers of Commerce research shows the cost stack facing a typical small and medium-sized enterprise (SME), built up from a decade of domestic policy decisions, has risen by more than 70%. A good chunk of that increase has landed since the Autumn Budget of 2024.
When we ask business owners what worries them most, the answer is consistent: inflation, taxation, and business rates, in that order. Only 17% of the firms we surveyed this summer said they planned to increase investment in the coming months. That is the lowest level since the pandemic.
This should worry us all. Every pound a business spends absorbing higher costs, is a pound that doesn’t go towards hiring a young person, upgrading technology, or lowering prices on the shelves.
An economy that works for everyone depends on businesses having the confidence to back themselves. Currently, too many feel hamstrung by costs outside their control before they even get the chance to hire, invest, or grow.
We need to remember, the cost of living and the cost of doing business are two sides of the same coin. The most impactful way to improve household finances has always been a job that pays well, in a business that’s growing.
That is why, ahead of this year’s Budget, the British Chambers of Commerce is calling for urgent action to cut the cost of doing business.
With nearly a million young people not in work, the number one priority has to be tackling the youth unemployment crisis head on. Scrapping employer national insurance contributions for every worker under 25 would lower the cost of taking on young staff and open up more entry points into work. To pay for this NICs relief, Ministers should be prepared to examine every available lever – including reform of the triple lock – while continuing to guarantee that pensions keep pace with inflation.
Then there is the weight of energy bills and business rates, which land on firms regardless of profit or loss. Reducing these costs would leave more cash available to businesses, currently being forced to choose between paying the electricity bill or buying new stock.
Firms also need stronger backing to sell abroad – it’s the fastest route to growing the economy. International trade isn’t only the domain of large corporations; it’s a huge opportunity for the SMEs in our communities, supplying goods and services to buyers across the globe. The Chancellor should bring back consistent, locally delivered export support nationwide, giving firms the tools to break into new markets and expand more quickly.
The Labour Party was founded to deliver for working people, and backing the businesses that employ them should be viewed as central to keeping that promise. As the Prime Minister calls for a ’circuit breaker’ moment for Britain, it’s clear that businesses need one too. So, I urge the Chancellor, use this budget to give business a bit of breathing space. Back business, cut their costs, and business will deliver the growth we all need to see.
Shevaun Haviland CBE, Director General, British Chambers of Commerce. Shevaun is not a Labour Party member and writes here as a guest contributor.
