Should Business Owners Be Worried About Rachel Reeves’ First Budget?

As the leaves turn crisp and golden in October, the nation’s entrepreneurs will brace for a political event that could redefine their future: the unveiling of Rachel Reeves’ first budget as treasury secretary.

Reeves, a figure who rose through the Labor ranks with a reputation for being both sharp and clever, has now risen to one of the most critical positions in the government. But should British entrepreneurs tremble in their boardrooms wondering what they have in store?

Rachel Reeves, the first female chancellor since the office was created in 1316 (yes, even that’s older than Mick Jagger), comes with an air of gravitas that suggests she’s not up for a ceremonial tea party. No, Reeves means business – literally. Her background as an economist at the Bank of England and her tenure as chair of the Business, Energy and Industrial Strategy Committee imply she knows her way around a spreadsheet. But here’s the problem: it’s not her competence that’s at stake; it is her ideology.

Business owners have been used to the Tory playbook of tax cuts and deregulation for years – a steady trickle of policies designed to keep the wheels of capitalism greased and turning. However, Reeves has indicated that she wants to move away from this laissez-faire approach and advocate what she calls “responsible capitalism.” The sentence itself sounds almost strange, as if it promises to transform the wild, reckless teenager that is British capitalism into a sensible, well-behaved adult. But is that really what business needs?

Let’s make one thing clear: businesses thrive on certainty. And while Reeves has vowed to maintain a competitive tax regime, she has also made clear her intention to crack down on tax avoidance, increase public investment and push for a fairer distribution of wealth. On paper, these goals are laudable: who wouldn’t want a fairer society? But in practice, they can pose problems for those who have become accustomed to the status quo.

Take, for example, Reeves’ plan to close the loopholes that allow multinationals to shift profits abroad and avoid paying their fair share of taxes. It’s a noble endeavor, but one that can have unintended consequences. Companies that have relied on these mechanisms to maximize profits may find themselves in a tighter financial position, forced to cut costs or, worse, consider moving to more tax-friendly jurisdictions. There are fears that Reeves’ responsible capitalism could lead to capital flight, with companies seeking refuge in countries where the reach of the tax authorities is not as long.

Then there is the issue of public investment. Reeves has committed to increasing spending on infrastructure, green energy and technology – areas that undoubtedly need an injection of cash. The big question, however, is: who pays the bill? If Reeves chooses to finance these projects through loans, she risks increasing the national debt, which could lead to higher interest rates and inflation. On the other hand, if she decides to raise taxes – especially on higher incomes and businesses – she could stifle the very entrepreneurship and innovation she wants to support.

And let’s not forget her commitment to workers’ rights. Reeves has pledged to strengthen labor laws, increase job security and ensure the minimum wage keeps pace with the cost of living. Again, these are laudable goals, but they come at a price for employers. More regulation and higher labor costs could force some companies, especially small and medium-sized businesses, to make difficult choices: either absorb the costs and put pressure on their profit margins, or pass them on to consumers in the form of higher prices. Neither option is particularly attractive in an economy already struggling with the cost of living crisis.

But perhaps the most important concern for business owners is the broader economic environment in which this Budget will be delivered. The British economy is still reeling from the consequences of Brexit, the pandemic and the war in Ukraine. Inflation remains stubbornly high and growth has been sluggish at best. Reeves’ budget will have to walk a tightrope: boosting growth without overheating the economy, and supporting the most vulnerable without deterring investment.

But despite all the uncertainties, it can also be assumed that Rachel Reeves’ approach could be exactly what the British economy needs. The past decade has seen a growing divide between the haves and the have-nots, with wealth concentrated in the hands of a few while many struggle to make ends meet. By addressing these inequities and investing in the future, Reeves could lay the foundation for a more sustainable and resilient economy – one where businesses can thrive in the long term, rather than just survive from quarter to quarter.

So should British entrepreneurs worry about what Rachel Reeves has in store? The answer is: it depends. If they are willing to adapt, innovate, and embrace a more responsible form of capitalism, they may find that Reeves’ budget presents new opportunities rather than threats. But for those who have grown accustomed to the old way of doing things, this new chapter in British economic policy could be a wake-up call. After all, as the saying goes, change is the only constant – and in the business world, those who cannot adapt are often left behind.

Ultimately, whether Reeves’ budget is a blessing or a curse will depend not only on the numbers she presents in October, but also on the response of the business community. Will they see her as a harbinger of doom or as a catalyst for positive change? Only time will tell. But one thing is certain: this fall, all eyes will be on the chancellor – and what she pulls out of her proverbial hat.