By Stephen Patterson, Chief Executive of NE1 Ltd, the Business Improvement District company for Newcastle city centre.
The past year has been challenging for many businesses; there’s no way to sugarcoat it.
Rachel Reeves’ first budget landed with a thud, even after being heavily trailed in the media beforehand, sending shockwaves through the business community. Difficult times followed for many, both in the immediate aftermath of the Treasury announcement and in the run-up to the new financial year, with all its proposed tax changes.
In April 2025, businesses faced the triple tax whammy of an increase in the national minimum wage, a rise in employers’ National Insurance Contributions, and a cut in business rates relief. These tax increases struck hard, coming as they did at the end of a run of global challenges, including the energy price hikes caused by the war in Ukraine and the ongoing struggle to regain stability after the Covid crisis.
It was no coincidence or surprise that between January and April this year, Newcastle saw the untimely demise of several prominent hospitality businesses that fell victim to these pressures.
Thankfully, the worst appears to be over, and the city’s economy has stabilised. There are even some positive signs of recovery. Spending figures for August and September in the city were cautiously encouraging, revealing that Newcastle is in a healthier economic shape than other comparable UK cities and has been performing up to 12% better than the UK benchmark in recent months.
It is a testament to the hard work and ingenuity of our city centre businesses, especially those in the hospitality and leisure sectors, that they have managed to steady their own ships. Using creativity and a deep knowledge of their businesses, they have tightened their belts and made the best of a bad situation. We are blessed in Newcastle with a host of long-established, independent businesses, especially in our much-envied hospitality scene. They are not afraid of hard work and are adept at pivoting, adjusting their businesses to deal with whatever is thrown at them.
Navigating these turbulent times has taken great fortitude – but businesses have exhausted their reserves. Now what they need and the city needs is a period of stability and economic certainty.
With the next Budget looming, we are calling on the Government to avoid any more sweeping changes and not to place an even higher burden on customers or businesses.
It is crucial that this autumn, the Chancellor delivers stability alongside some well-targeted support, particularly for those industries that have borne the brunt of recent challenges. Hospitality, retail and leisure are the backbone of our cities and communities. They need meaningful help to ensure that they are not merely surviving, but are thriving. These sectors are among the nation’s largest employers, and supporting them is essential to safeguard jobs and drive economic recovery and growth.
We have two main asks of the Government: firstly, to reduce VAT for the hospitality sector. The UK is one of the only places in Europe to charge the same rate of VAT for hospitality as other sectors, and it is crippling the industry. Cutting VAT would send a clear signal that the government supports the hospitality industry and would boost business confidence. Businesses could then decide whether to pass on the VAT savings to customers in the form of lower prices or retain more of the income from sales to boost cash flow, which would provide a muchneeded lifeline at a time when margins are razor-thin. A permanent VAT reduction could also protect thousands of jobs and encourage long-term investment.
Business Rates relief for all retail, hospitality and leisure businesses, the cornerstone of our high streets, is our second key recommendation.
A business rates review, coupled with a proposed ‘supertax’ on properties with a rateable value of £500,000 or more, is rumoured to be in the chancellor’s red box. These proposals are fuelling great uncertainty among businesses and prompting warnings that large retailers, especially those much-loved staples of the high street, would be adversely affected by these proposed changes, with disastrous consequences. Store closures, hundreds of job losses and ultimately higher prices for customers would be the inevitable result of hikes in business rates for large high street tenants. The loss of these major anchor tenants would have a domino effect, leading to more vacant units and a further decline in UK city centre high streets. By contrast, extending business rates relief to all hospitality, leisure and retail businesses regardless of their size or rateable value would provide much-needed support, helping these sectors to thrive. Reducing tax burdens would also encourage investment and expansion.
Businesses have done all they can to weather the recent economic storms. They now need Government support to move forward, restore economic stability and lay the foundations for future growth and expansion.
www.newcastlene1ltd.com