UK Budget 2025: Trade bodies call for more pro-business measures

UK trade bodies are urging the Labour government to introduce more pro-business measures rather than focusing on tax hikes to restore confidence and boost economic growth following Chancellor Rachel Reeves’ Autumn Budget speech to Parliament on 26 November. 

Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), said the “tax-raising budget” showed the peril of a continuing economic doom loop to balance the books due to a lack of economic growth. 

“We need the government to follow this budget through with serious, pro-growth measures that restore the confidence small businesses need to grow, invest and hire,” McKenzie added.

“While the Chancellor has taken important steps today on SME training and the new jobs guarantee scheme, ministers must now bring forward pro-business, pro-growth policies. Otherwise, we’ll be back at square one, stuck in the same rut we were in last year.”

During her budget speech, Reeves unveiled a range of measures to plug the public spending gap, including raising £26bn in tax hikes by freezing the income tax threshold for another three years to April 2031, which will push workers into higher tax bands when they receive salary increases.

The Chancellor increased the national living wage to ease the cost-of-living burden on households and introduced a range of measures to boost business growth and investment. These include permanently lowering business tax rates for 750,000 retail, hospitality and leisure properties, as well as pledging to fully fund apprenticeships with small and medium-sized enterprises for people under the age of 25.

According to the latest Santander UK Trade Barometer, UK business confidence continues to soften, driven by persistent cost pressures, rising taxation and a challenging macroeconomic environment. 

This has led to more businesses looking beyond the UK for growth, with nearly half of respondents to the Trade Barometer survey now considering international expansion, up from a third in the spring.

“This shift speaks not only to domestic headwinds, but to a broader recognition of the opportunities emerging across global markets – from new trade agreements to the reconfiguration of supply chains and the accelerating pace of digital transformation,” Santander UK said in the report.

Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI) said the government’s growth mission had stalled despite creating the fiscal headroom needed for public spending.

“The government should be commended for protecting capital spending, boosting innovation, sticking with the corporate tax roadmap, and hiring the planning officers business asked for,” Newton-Smith said.

“But business will still rue a missed opportunity to be bold and press on with much-needed tax reform, simplification and alignment of incentives to catalyse business investment and job creation,” he added.

Shevaun Haviland, director general of the British Chambers of Commerce, was more positive, saying that Reeves had “calmed nerves” by making the right choice not to introduce new tax rises on businesses.

However, Haviland added that businesses will be worried about the salary sacrifice changes, mandatory wage increases and the retention of the energy profits levy, which will maintain cost pressures.

“While most businesses will weather this new financial landscape, they are still being squeezed by rising costs,” Haviland said.

“Many will be disappointed that this budget did not provide a more compelling blueprint to deliver transformational growth.” 

Meanwhile, the Food and Drink Federation (FDF) welcomed the government’s Soft Drinks Industry Levy extension to include more high-sugar drinks. 

The extension applies to pre-packaged milk-based and milk-alternative drinks with added sugar, such as supermarket milkshakes, flavoured milks, sweetened yoghurt drinks, chocolate milk and ready-to-drink coffees, the government said in a statement.

“We’re pleased the government has listened to industry. The new proposals take into account the costly and technically complex work that companies have to do to bring healthier products to market and go some way to protecting the investment companies are making to help people follow healthier diets,” Karen Betts, chief executive of the FDF, said.

“Drinks manufacturers will continue conversations with government to ensure we have the right conditions to keep investing in healthier product innovation in the UK, even while the rate of food inflation continues to run so high,” Betts added.

The government lowered the threshold from 5g to 4.5g of sugar per 100ml, meaning that more high-sugar drinks will fall under the levy. Manufacturers have until 1 January 2028 to reduce the sugar content or face paying the levy.

Drinks containing between 4.5g and 7.9g of sugar per 100ml fall into the lower levy band of £1.94 per 10 litres, while drinks above 8g per 100ml are classed in the higher levy band at £2.59 per 10 litres.