Policy Update 8th January 2025

Hi?Irene Welcome to this week’s policy update. ?

As ever please do get in touch with me, [email protected], if you’d like to discuss the following, or other, business issues, put forward your views and/or provide real life examples that we can use in advocacy activity. ?

The British Chambers of Commerce (BCC) has published Chambers’ latest Quarterly Economic Survey - the largest poll of business sentiment since October’s Budget. The results show concern about tax, including national insurance, has spiked: ?

• 63% of businesses say tax, including national insurance, is now a concern, following the Chancellor’s Budget – up from 48% in Q3 and the highest level since 2017, when BCC started asking this question.?The levels in certain sectors are higher, with 72% of production and manufacturing businesses, and 68% of construction and engineering businesses raising tax as a concern. Tax is now by far the top external concern.?
• Business confidence has slipped significantly to its lowest level since the aftermath of the mini-Budget in Autumn 2022,?with only 49% of respondents expecting their turnover to increase over the next twelve months (compared with 56% in Q3). Confidence levels are lowest in the retail and hospitality sectors (39% and 42% respectively).?A fifth (21%) of businesses expect turnover to worsen, up from 15% in Q3, and 30% expect no change.??
• Profitability confidence has also been hit. 40% of businesses expect profits to increase over the next year (compared with 48% in Q3), while 32% expect them to fall.??
• A majority of businesses (55%) now expect to raise their prices in the next three months, with labour costs the biggest driver?(compared with 38% in Q3). 43% of businesses expect to hold prices and only 2% expecting to reduce them.??
• Only 20% of businesses have increased investment in the past three months (down from 23% in Q3). ?24% say they have cut back investment plans, a steep rise from the Q3 figure of 18%. 56% say their plans have remained the same.??The issue is more marked in certain sectors, with 42% of retail and hospitality businesses reporting a scaling back of investment and 30% of manufacturers.??
• Business conditions are weak, with only 24% of businesses reporting increased cashflow and 30% a decrease.
• The percentage of respondents reporting increased domestic sales has fallen again to 32%, compared to 35% in Q3. 42% reported no change and 26% that they had seen a decrease in sales.??Retailers were the most likely to have seen a fall in sales (36%) followed by manufacturers (33%).??
• Labour continues to be the main cost pressure – but the issue is now raised by 75% of businesses, up from 66% in Q3. The issue is most significant for the hospitality sector with 87% reporting it as a challenge, followed by 84% in the transport and logistics sector.??

The survey was conducted after the Budget, with the fieldwork carried out between 11th November and 9th December. The data from over 4,800 businesses across the UK (91% of which are SMEs – fewer than 250 employees) also shows that the majority of businesses are expecting to raise prices. ?

The worrying reverberations of the Budget are clear to see in this survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes These national results come as no surprise, reflecting our post-Budget expectations and the responses to our local post-Budget survey. Businesses of all shapes and sizes are telling us the national insurance hike is particularly damaging. Many are already cutting back on investment and say they will have to put up prices in the coming months.? ?

The Government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now and you have to question where the growth needed to fund future plans is to come from under these conditions.?And the challenges will also hit consumers, not least through price rises. Business stands ready to work in partnership to make the proposed Employment Rights legislation work for all, but the current plans will add further costs in already difficult times.?Without urgent Government action to ease the pain on businesses, the challenging economic landscape will get worse before it gets better. ?

Thanks as ever to Ginny Murphy, Cumberland Council, for the December labour market briefing. ?Key headlines for Cumbria are as follows:

• There were estimated to be 225,583 residents in payrolled employment in November 2024, broadly similar to the October figure and meaning that there are 1,645 more residents in payrolled employment than a year ago.?
• Median monthly payrolled earnings in November 2024 in Cumbria were provisionally estimated to be ￡2,367 which is 96% of the UK average.? Annual earnings growth in Cumbria was 5.8% and this has now slipped behind the national rate of growth (6.3%) for the first time in 18 months.? Over a longer period (2 and 3 years) earnings growth is still stronger in Cumbria than nationally.
• There were 7,150 claimants actively seeking work in November 2024 which is 40 fewer than in October.? The number fell in the former district areas of Allerdale, Barrow and Copeland but rose in Carlisle, Eden and South Lakeland as well as nationally.? The claimant rate in Cumbria was 2.4%, unchanged from October, and it remains lower than the national rate of 4.2% in all former district areas.? However, claimant rates for young adults in Barrow are above the national average (5.8% v 5.4%) and are similar to nationally in Copeland (5.4%).
• There were 42,478 claimants of Universal Credit (UC) in November 2024 (in work, out of work, actively seeking work), a rise of 955 from October and 5,355 more than a year ago.? The number of UC claimants seeking work fell slightly but the number in work rose by 363 and the number with no work requirements rose by 622.? Changes to income thresholds and the ongoing transfer of claimants from legacy benefits is impacting this.
• There were 15,639 UC claimants on “UC Health” in September 2024 which is 5.2% of all working age residents, just below the national rate of 5.5%.? However, the rate of UC Health claimants is above the national average in the former districts of Allerdale, Barrow, Carlisle and Copeland.
• There were 353 young people (aged 16/17) classed as NEET (Not in Employment, Education or Training) in October 2024 which is 155 fewer than in September (a fall is expected at this time of year).? The NEET rate was 3.4% in Cumbria in October, similar to the same time last year.? The rate was 3.8% in Cumberland and 2.8% in Westmorland & Furness.? The participation rate of young people in learning was 90.7% in October (89.0% in Cumberland and 92.9% in Westmorland & Furness).? National comparisons are inaccurate at this time of year due to varying approaches to tracking at this time of year.
• According to Lightcast there were 8,232 active online job postings in November 2024, 62 fewer than in October.? The volume of new postings during the month also fell.? The occupations most in demand were care workers, cleaners & domestics, sales and kitchen & catering assistants.? The health, retail, food & beverage services and manufacture of other transport equipment sectors accounted for the highest volumes of job postings.
• There were 470 small business start-ups in the quarter ending October 2024, 34 fewer than last quarter and 97 fewer than the same quarter last year.
• There were 220 new Companies House incorporations in October 2024 and 169 businesses were recorded as dissolved/in liquidation during November 2024.
• There were 30,655 active companies in Cumbria at the end of November 2024, 95 fewer than in October.? Of these, 1,828 had posted results indicating a 10% or higher increase in employment and/or turnover whilst 1,480 had posted results showing a decline of 10% or more in one or both measures.? Among active businesses, 667 had a high risk credit score which represents 4.2% of those on the system with a score (UK 6.9%).

Key national headlines are:

• At UK level, payrolled employment was estimated to have fallen by 35,000 in November 2024 but had increased by 76,000 over the year.
• The UK employment rate was estimated at 74.9% in the quarter to October 2024, up 0.1 percentage point on the latest quarter but largely unchanged from a year ago.
• The UK unemployment rate (including claimants and non-claimants) was estimated at 4.3% in the quarter to October2024, up 0.1 percentage point from last quarter and 0.3 from a year ago.
• The UK economic inactivity rate (those working and not seeking work) was estimated at 21.7% in the quarter to October 2024, down 0.2 percentage points from last quarter and also down 0.2 from a year ago.
• The estimated number of job vacancies (measured via a business survey) was 818,000 in the quarter to November 2024, down by 31,000 from the previous quarter.? This is the 29th consecutive decrease with vacancies decreasing in 9 of the 18 industry sectors.? However, vacancy levels remain above their pre-pandemic levels.
• Annual growth in earnings for both regular (excluding bonuses) and total earnings (including bonuses) was 5.2%.? Earnings growth in the private sector was 5.4% and the public sector was 4.3%.? In real terms (adjusted for inflation) both regular and total pay increased by 2.2%.

Public consultation for the Comprehensive Spending Review is now open until 9th February. The review will set UK government spending plans, by department, for a minimum of three years. We’re working actively with the British Chambers of Commerce and other Chambers nationally to put toward targeted, focussed and evidence-based asks. Please get in touch with me with any views or evidence, [email protected]. ?

Westmorland and Furness Council is now in its second year of delivering many essential services for residents, businesses and communities – from waste collection and recycling to social care, education, roads, planning and much more. After careful consideration, given the current economic climate and the uncertainty of future funding from Government, the council is now seeking residents' views on a proposal to increase its share of Council Tax by 2.99% for next year and implement the Government’s 2% increase for the Adult Social Care precept. This takes the total increase to 4.99%. If approved, this will help the council achieve a balanced budget, which is a legal requirement. Westmorland & Furness Council has launched a consultation on its budget proposals which will run until 17th January. The full consultation document can be viewed at www.westmorlandandfurness.gov.uk/budget. ?

Small businesses with up to 50 employees are now eligible to access Energy Ombudsman’s independent dispute resolution services for the first time. Energy Ombudsman, approved by the Office of Gas and Electricity Markets (Ofgem), provides a free and impartial service that aims to resolve disputes between consumers, suppliers and brokers in the energy sector. The expanded remit will allow small businesses to resolve disputes with energy suppliers and energy brokers without resorting to costly and time-consuming court proceedings. You can find out more here Energy Ombudsman Extends Access to Small Businesses | Energy Ombudsman.

From the 2026 cycle, UCAS Tariff points will be allocated to Level 3 and SCQF Level 6 apprenticeships. The aim of this new initiative is to position apprenticeships across the UK as a recognised pathway into higher education, alongside A Levels, T Levels and other Level 3 /SCQF Level 6. This is part of UCAS’ broader aim to support a diverse range of progression routes into university or college. You can read more here?UCAS announces Tariff points rollout for apprenticeships | Undergraduate | UCAS.

• A new survey by the BCC’s Insights Unit of 1,111 businesses (92% SMEs), informing Chambers’ TCA (Trade & Cooperation Agreement) Four Years on report, shows the urgency for the Government to reset trade relations with the EU is increasing.?The TCA was agreed on Christmas Eve in 2020 to allow tariff-free trade with the EU once Brexit took effect.?The BCC report, assessing the fourth year of Brexit, identifies fresh challenges as regulations continue to diverge, creating further headaches for traders on both sides of the Channel.?The survey indicates that:
• Two fifths (41%) of exporters disagree the Brexit deal is helping them grow sales, only 15% think the deal is helping them grow sales with Europe.
• Almost half (46%) of businesses want the Government to make it easier for UK staff to work in the EU.?
• More than three quarters (77%) of traders are unaware of details about new safety and security regulations affecting EU imports in January 2025. This includes knowledge of the Carbon Border Adjustment Mechanism (CBAM), Border Target Operating Model (BTOM), Safety and Security Declaration Requirements and new rules on business-to-business movements of parcels to Northern Ireland.???
• Businesses said the biggest barriers to exporting they faced were customs procedures and documentation (45%), export documentation (39%), regulations and standards (36%) and tariffs (34%).?
• 36% of businesses wanted to see reduced VAT requirements for exports, and a quarter (24%) wanted mutual recognition of professional qualifications.?

Our TCA Four Years On report, which has been sent to government, sets out 26 recommendations to improve UK-EU trade.?Its top five proposals for discussions in 2025 are:???

• Negotiate a deal with the EU which either eliminates or reduces the complexity of exporting food for SMEs.?
• Produce a balanced Youth Mobility scheme between the UK and EU, covering school visits and exchanges, and a time-limited ability to work for young people.?
• Develop new arrangements on changes to regulations to minimise disruption to businesses and raise awareness of any fresh impacts.???
• Establish a supplementary deal, like Norway’s, that exempts smaller businesses from the requirement to have a fiscal representative for VAT in the EU.??
• Make a deal to allow UK businesses to travel for longer and work in Europe and vice versa, and provide mutual recognition of professional qualifications.???

The Government has said economic growth is its number one priority but if that is going to happen then we need to export more, and the EU is still our biggest market.??BCC modelling indicates that if exports had grown 1.0% in 2024, compared to our forecast of a 2.0% contraction, then the economy could have grown up to 1.7% instead of 0.8%. That’s a big difference. ?

But the structural trade problems created by Brexit have not eased and, in many respects, they are getting worse as EU and UK rules and regulations head in different directions.?The Government has talked a lot about a new era of trade relations with the EU. But firms are grappling with increasing costs off the back of the Autumn Budget and this change cannot come soon enough.? ?

We need to see a smart and flexible approach to these negotiations. Businesses are clear on what they want to see, less paperwork and bureaucracy, greater flexibility on business travel and a balanced Youth Mobility Scheme between the UK and EU.?There is no time to lose in driving forward the changes we need to see. Businesses are suffocating under a blanket of rising costs and improving our trading relationship with the EU could provide the growth needed to transform the dour outlook many are facing. ?

On the same day as the above report was published, BCC Director General, Shevaun Haviland, wrote an opinion piece in the Daily Telegraph highlighting the importance of trade in growing the UK economy. You can read some of the key points in her article here: ?

“As we go for growth in 2025, the UK has huge strengths to build on, be that in financial services, renewable energy, engineering, manufacturing, transport or food and drink. It has been encouraging to see the Government seek to build a strong relationship with the private sector to help turbocharge investment and exports in these sectors. ?

However, we must confront the reality that we are living in an increasingly complex and fragmented world, which presents unique challenges for business and trade. As we approach 2025, it’s vital that the UK gets match fit for what will be an increasingly fractious era for trade. Businesses want to see a positive, bold vision for Britain – one that keeps the global trade system as open as possible, and increases investment and the contribution of exports to economic growth. ?

With an uncertain era of trade on the horizon, including the prospect of tariffs, it is now more important than ever that we revitalise the conditions for businesses to sell more goods and services internationally. Doing so will not only elevate the UK’s position at the top table of world trade, but it will also power up our economy at home.” ?

Join the DBT trade strategy engagement event. A virtual event with the Department for Business and Trade (DBT) trade strategy team will take place on 14th January at 3pm. Please get in touch if you’re a Chamber member interested in taking part, email me at [email protected]. ?

The Office for National Statistics has released?UK trade data for October 2024. Goods exports declined, but services exports rose between August and October. You can read BCC’s reaction to the figures here: Exports Slowing But Services In Better Shape? - British Chambers of Commerce and read more on the ONS data here UK trade - Office for National Statistics. ?

A Written Ministerial Statement has been released on the UK-Gulf Cooperation Council trade negotiations. You can read more here UK-Gulf Cooperation Council trade negotiations. The BCC continues to work with the UK negotiating team on issues including document issuance, tariffs, and services market access. ?

CPTPP trade preferences now active. Trade preferences under the took effect on 15th December with eight countries., followed by Australia as a ninth on Christmas Eve. You can read BCC’s comments as the Agreement moves into implementation here our comments and more about CPTPP here Comprehensive and Progressive Agreement for Trans-Pacific Partnership texts | New Zealand Ministry of Foreign Affairs and Trade. The European Commission has published an updated Q&A document on the Carbon Border Adjustment Mechanism (CBAM), which affects third-country exporters and EU importers of record. You can access it here: 013fa763-5dce-4726-a204-69fec04d5ce2_en. ?

BCC Head of Trade Policy, William Bain has provided a new Q&A on the impact of the EU General Product Safety Regulation, helping explain what GB businesses trading in Northern Ireland and the EU need to do to comply. You can access it here General Product Safety Regulation - Your Key Questions Answered - British Chambers of Commerce. ?

BCC’s Business Council is targeted at large companies and institutions who want representation rooted in their local communities and the ability to shape the national debate. The Council meets quarterly to discuss the key policy issues faced by British businesses at a national level and is integral in helping to shape the messages and recommendations BCC takes to government. There is an engaging programme lined up for the 2025 Business Council meetings, featuring high-profile keynote speakers covering a range of impactful topics. If you’d like to learn more about the Business Council and becoming a member, please let me know, [email protected].

With very best wishes for 2025! ?

Suzanne Caldwell Managing Director ?