Chancellor sets out "difficult decisions" in first Labour budget in 14 years

In her first Budget as the UK's first female Chancellor, Rachel Reeves has outlined a series of tough measures to restore economic stability, including 40 billion pounds in tax rises and spending cuts.

Reeves, who previously warned of "difficult decisions" ahead, has confirmed that the national minimum wage will rise to 12.21 pounds per hour for those aged 21 and over from April. However, businesses face a significant increase in their tax burden, with employers' National Insurance Contributions set to rise from 13.8 percent to 15 percent. Additionally, the threshold for paying NI on employee earnings will be lowered from 9,100 pounds to 5,000 pounds, raising an estimated 25 billion pounds.

Difficult choices

Reeves acknowledged the difficulty of these choices, stating, "I do not take this decision lightly." Nonetheless, the fashion industry, a key B2B sector, is likely to voice concerns over the impact on their bottom line.

While the current 75 percent discount on business rates is set to expire in April 2025, Reeves has announced it will be replaced by a 40 percent discount, capped at 110,000 pounds. This means many businesses will see their rates nearly double, rather than quadruple, providing some relief but still a significant increase in overhead costs.

Reeves struck a defiant tone, declaring that "the only way to drive economic growth is to invest, invest, invest." She emphasized the need to "fix the foundations" and ensure that change is "felt" by people, with "more pounds in people's pockets."

However, the scale of the tax rises, one of the largest outside of a recession, will test the government's ability to balance fiscal responsibility with supporting businesses and consumers. Fashion leaders will be closely watching the impact on their sector's competitiveness and profitability.