How Will Labour Affect Business?

Dust has been given chance to settle, and companies nationwide will now be asking “how will Labour affect business?”

Historically, it’s been the Conservatives that have marketed themselves as the party for businesses, with Labour more focused on the employee. This election, however, saw Starmer’s Labour position themselves as the choice for small businesses in their campaign efforts.

Surprisingly, there were even several policies in the Labour manifesto that were similar to those of their Tory counterparts. The main difference between the two, is that Labour’s manifesto had an overarching plan, and had been explicit in which industries will receive the most attention. Identifying the overreliance on energy sources from overseas as an issue, there will be several clean energy industries that will be due significant investment.

Outside of this, the main message they’ve been keen to push is one of UK businesses being able to stabilise after a chaotic few years. To answer the question, “how will Labour affect business?”, however, will depend entirely on which industry you operate in. We looked at a handful that are either set for change, or just desperately requiring some.

 

 

Beers, wines & spirits

The drinks industry has endured a rough few years and will be hoping for some help from the new government to get back on track.

Where the industry finds itself now, is holding on to hopes that Labour don’t follow through with plans already put in place by the Tories. Among some of the controversial changes the previous government had set in motion, is the altering of duty paid on wines between 11.5% and 14.5% ABV. The current single rate for these wines is set to be replaced in February 2025 with 30 different amounts instead.

CAMRA, meanwhile, hopes that Labour make good on their campaign message that they want to “end the decline of British locals”. It’s thought that one of the ways they hope to achieve that is by empowering communities with ‘right to buy’ schemes. These could allow well-loved pubs to stay open through community ownership.

 

Construction & housing

In an attempt to ease the housing crisis, Labour plan to build 1.5 million new homes over the next five years. This will undoubtedly be of help to a currently limping construction industry. Housebuilding firms and similar have been folding at an alarming rate, and the industry will be hoping for extra help beyond the planning for more homes.

That said, the number of properties needed, and the timescale given to build them will still provide cheer for those in the industry. Additional work will be available thanks to the stated intention of building on brownfield and grey belt land.

Definitions of brownfield land differ from country to country, but generally refer to land previously used for industry. The environmental clean-up that some of these sites will require will provide extra work for specialist construction firms. Grey belt land, meanwhile, seems to describe areas of the green belt that have previously been built on, but left to fall to ruin.

Despite this good news for the industry, developers may be concerned about Labour’s proposal that 50% of any new grey belt developments must offer affordable housing. This could be difficult to achieve for housebuilders that have seen inflation hike up construction costs recently.

 

 

Alternative energy sources

The Russian invasion of Ukraine and the subsequent decision to restrict trading with the aggressor caught the UK on the hop. Energy prices quickly went through the roof, and many businesses found themselves struggling to absorb the price hike.

Labour’s manifesto was very clear in its aim to reduce its reliance on overseas oil and gas. They plan to do this by setting up a nationalised Great British Energy company which would handle several different energy sources.

Because of this, there will be particular investment made in industries specialising in cleaner energy production. £500 million has been allocated “to support the manufacturing of green hydrogen”, while £1 billion has been earmarked for the development of carbon capture practices.

 

Steel

Labour announced a National Wealth Fund of £7.8 billion which would help to grow their cleaner energy plans, and the economy. The recipient of the largest slice of this fund will be the steel industry.

£2.5 billion will be set aside for the steel industry, which UK Steel describes as a “key driver of economic growth”. The organisation, which acts as a trade association for the UK steel industry, had also published a manifesto, the contents of which align closely with Labour’s own. In it, they ask for electricity market reform, stronger trade agreements with other countries, and more involvement with decarbonisation plans.

 

Retail

Chief Executive of the British Retail Consortium, Helen Dickinson, highlighted some of Labour’s manifesto pledges as potential benefits for the retail industry. Commenting on the election result, she said that “Labour’s manifesto made some crucial commitments for retail, from reforming business rates, planning and the apprenticeship levy, to introducing a specific offence for assaulting a retail worker”.

Expanding on this, she added that “Labour recognised that the business rates system is broken. With retail paying 22% of the total rates bill while accounting for 5% of the economy, it is the number one thing in the way of increased retail investment which could unlock growth across the economy”.

 

Advertising and marketing

The main draw of a new government for the advertising industry isn’t any particular policy at all, but rather the hope of an end to a period of uncertainty.

Director of Derbyshire marketing firm, JDR Group, Leanne Mordue, explained that “even though stability sounds dull, businesses will appreciate a period of calm because it’s more predictable, and that’s good for business”.

Similarly, the Advertising Association agreed that more stability will allow businesses to relax more (and presumably spend more on advertising). They point to the fact that in the last eight years alone they’ve had to work with “11 secretaries of state for culture, media and sport and nine for business and trade”.

 

Hospitality

Few sectors have suffered as much as the hospitality industry over the last few years, and those involved in it are hopeful of some beneficial changes. Among these, Labour’s proposed reform of business rates is the policy many are focused on.

Kate Nicholls, CEO of UKHospitality, said after the election result that “swiftly addressing business rates would fulfil a longstanding ask of the sector and avoid a cliff-edge in April, when current relief is set to end, and rates are due to increase again”.

Despite positivity toward pledges to review the business rates structure and the apprenticeship levy, some of those within the industry may fall foul of a different policy mentioned in Labour’s manifesto. Starmer’s plan to remove age bands for the minimum wage could affect thousands of hospitality workers.

Add this to a pledge to ensure that the minimum wage will be a “genuine living wage” too, and the rise in wages could have serious ramifications for those that employ multiple young workers. Based on current minimum wage rates, 18-year-olds will enjoy a £2.84 per hour increase to their pay.

 

 

Utilities

The formation of Great British Energy is bound to spook those in the gas and oil sector. Details on what it will offer, and when it will be implemented, are still vague though. As the centrepiece of their manifesto, however, its likely that Labour will be keen to start moving on this pledge as soon as possible.

Certain energy companies may be able to take advantage of the new government’s investment in cleaner energy, but others are bound to take a hit. For many in the energy sector, it promises to be a period of large uncertainties until Great British Energy is established.

 

Tax implications for businesses

Labour plan to reform the current business rates system but still generate the £27 billion that it does now. They hope to do this by leaning more on larger corporations, which will allow smaller businesses to pay less.

They also pledged to cap the Corporation Tax rate at its current 25%. This is part of a larger ethos to provide businesses with more stability when making decisions and investments. Starmer’s manifesto is explicit in its desire to provide fewer out-of-the-blue tax hikes and less tinkering, so that businesses can plan their strategies accordingly. They have already stated that they’ll only announce one major fiscal event each year.

 

So, how will Labour affect business?

In a nutshell, those in the business of alternative energy sources can look forward to a potentially fruitful few years, while those dealing in older fossil fuels can be forgiven for starting to look over their shoulders.

Elsewhere, the construction industry will be hoping for an upturn in fortune, while the beleaguered retail and hospitality may find that minimum wage changes could level out the benefits they’re expecting in other places.

 

Whatever the future throws at your business, you can count on us

At Forbes Burton, we have business experts that specialise in several different fields. If you’re worried that some of the new government’s policies may have an adverse effect on your company, then get in touch with one of our friendly advisers. We provide free, no-obligation advice to help directors and business owners navigate any issues they have.

Our experienced team of specialists can help from everything from M&As to renegotiating HMRC payments. Call us on 0800 975 0380, or email [email protected] for a free consultation today to see how we can help your business.