Autumn 2024 Budget: Economic Outlook and Consumer Prospects | Mintel

The Autumn 2024 Funds was historic for numerous causes. Rachel Reeves’ assertion was the primary delivered by a Labour Chancellor in 14 years, and the primary ever by a feminine Chancellor. Most pressingly, although, the Funds delivered one of many largest tax rises in British political historical past.

Labour delivers a tax revolution

In whole, Labour has introduced round £40 billion of tax rises throughout the economic system. A lot of this comes from climbing employers’ Nationwide Insurance coverage (NI) contributions. Modifications to capital beneficial properties tax, inheritance tax, stamp responsibility for extra properties, and VAT on personal schooling charges are amongst a spread of different rises designed to assist gas what can be a considerable rise in public funding. The federal government hopes this can kickstart progress within the UK economic system, however customers can be most involved about the way it impacts their financial institution stability.

Tax rises are at all times a tricky promote

Virtually any political announcement within the present atmosphere is met with large disagreement and division. This Funds can be no totally different. No matter the place they’re focused, tax will increase – by no means thoughts at this scale – are assured to trigger fury in some quarters.

Earlier than the Funds, Mintel analysis reveals solely a fifth of individuals felt supported by the federal government. Only a quarter consider the federal government makes selections with folks’s finest pursuits in thoughts. Whether or not and the way these attitudes change following the Funds will rely upon people’ circumstances, however this sentiment provides a very good steer as to how we will count on Brits to reply to post-Funds headlines.

Customers will fear about how this can have an effect on their pay packet…

For people, the influence of this Funds will take time to really materialise. 

Earnings tax, VAT and workers’ Nationwide Insurance coverage contributions have been left untouched, and the bottom earners will profit from a 6.7% rise within the minimal wage. It will assist these among the many hardest hit by the price of dwelling disaster and experiencing the slowest restoration. Mintel analysis reveals 43% of these in households incomes lower than £25,000 a 12 months – the brand new full time minimal wage from April 2025 – described their funds as tight, struggling or in bother in October, whereas 37% felt worse off than a 12 months earlier than.

Any improve in earnings at this stage can be well-received. Nonetheless, these incomes above the minimal wage face much less sure prospects.

Elevating employers’ NI contributions, and slicing the brink at which employers begin to pay it, will price companies an additional £25 billion a 12 months, in accordance with the federal government’s calculations. It’s virtually sure that almost all of this can be handed on to people by means of weaker wage progress and better costs.

For a lot of, this can imply an extra extended squeeze on family incomes and, in flip, shopper expenditure. The Workplace of Funds Accountability’s (OBR’s) Financial and Fiscal Outlook, which accompanied the price range, forecasts weaker family spending progress yearly by means of to 2028, relative to what it forecast in March.

… impacting shopper confidence

It’s not simply the fabric results of tax hikes that can stifle expenditure. Important tax will increase have been extensively anticipated, and in October, earlier than the Funds was introduced, 72% of Brits predicted them within the subsequent 12 months. However affirmation of those rises will influence shopper confidence.

We’ve already seen confidence sag this 12 months as Brits proceed to wrestle with the price of dwelling. In October, 56% nonetheless thought the price of dwelling disaster wasn’t getting any higher. Whatever the precise results on family funds, the narrative of a high-tax Funds will trigger many to look forward with higher concern and warning, particularly given two-thirds thought taxes have been already too excessive.

Rapid spending will stay constrained…

Given the beforehand introduced adjustments to the Winter Gas Fee and October’s rise within the power cap, gas prices have been already a sizzling matter of debate. It will ramp up as we transfer into the coldest months of the 12 months. Half of Brits are involved about with the ability to afford their power payments this winter, and two-fifths count on to cut back power use within the subsequent two months to save cash.

Extra broadly, well-established savvy procuring behaviours, akin to procuring at low-cost retailers and shopping for own-label merchandise, will stay widespread. Most manufacturers might want to prioritise proving worth, as customers proceed to concentrate on worth and worth for cash.

… however we’re nonetheless in restoration, and that’s broadly a very good factor

Past the headlines, there are nonetheless causes to be constructive. Finally, the typical shopper gained’t be affected by greater capital beneficial properties tax (CGT) charges, greater duties for personal air journey, or the tip of the non-dom tax regime. Most Brits gained’t be impacted by any of the measures within the quick time period, and whereas forecasts for family revenue and spending are weaker than in March, each are nonetheless projected to develop.

Greater than something, the Autumn 2024 Funds is prone to lengthen the restoration from the price of dwelling disaster, slowing the rebound in family funds and shopper spending within the quick time period for a promise of long-term progress that ought to profit everybody. So, successfully, extra of the identical that we’ve got change into accustomed to for longer.

However even in restoration, there are alternatives for manufacturers. Most Brits are nonetheless getting by financially and count on to take action over the approaching 12 months. Many need to deal with themselves the place they’ll after a chastening few years. The lipstick impact is in full swing in every single place from magnificence to meals and leisure, whereas journey has loved a bumper 12 months in 2024. Heading in direction of Christmas, many customers stay cautious about spending, however are typically extra bullish about opening their wallets than within the final two years.

Customers are prepared to spend on items and providers that make them really feel good. Manufacturers simply need to work exhausting to show their worth. Rachel Reeves’ Funds doesn’t change this.