What can nervous businesses expect from the Budget?

Business leaders face a nervous final few days before the chancellor's second Budget, having borne the brunt of a brutal set of tax hikes this time last year.

Firms are still reeling from those: the £25bn National Insurance increase and an inflation-busting rise in the minimum wage.

Confidence in boardrooms has grown increasingly fragile as the Budget nears. Almost all measures of sentiment among chief executives and finance bosses in the last six months have shown alarm bells ringing.

So what can nervous business owners and leaders expect from Rachel Reeves?

So what might be in the mix?

Business rates are a bug-bear. Many firms have seen their bills almost double, after a pandemic-era discount of 75% for retail, hospitality and leisure businesses was cut to 40% last year.

The chancellor has previously promised reform. She could make the existing discounts permanent and remove cliff edges that see small businesses' rates bills shoot up when they expand. That could be partly paid for by increasing rates on the largest retail properties.

Business Secretary Peter Kyle addressed the Confederation of British Industry (CBI) conference on Monday, and had a couple of business-friendly policies to announce.

He pledged to lower electricity bills for 7,000 British businesses, and said the British Business Bank would focus its lending on the eight "high potential" sectors identified in the industrial strategy.

He told the conference: "Let's not kid ourselves — actual growth, real growth, comes from enterprise and wealth creation.

"We will build a pro-business, pro-wealth creation, pro-growth Britain. This week's budget will take the fair and necessary choices to embed that further."

The chancellor is also likely to point to the upcoming Planning and Infrastructure Bill, a piece of legislation that she has described as "probably the biggest thing we will do this parliament", as a way of removing barriers to growth.

Bank profits are a tempting target and there have been mixed messages on whether she might hike taxes there. But ministers are concerned it does not fit the pro-growth, pro-investment narrative.

It is possible that the Treasury will reduce payments to the Bank of England that cover their losses on the sales of government bonds that were bought to support the economy during the pandemic and financial crisis.

That in turn reduces payments to commercial banks and would be seen by them as a bank tax in all but name.

The oil and gas industry has lobbied hard for some respite on the "windfall" taxes on their profits, arguing that, with oil prices low, there is no windfall profit to tax. They say investment in the North Sea is shrivelling fast, with knock-on effects in refinery and chemical plant closures. Firms say relief could preserve jobs.

The additional 38% tax, which is on top of a 40% tax rate specific to the industry, is due to expire in 2030. There is a chance it could be phased out earlier.

One other policy that will hit both employers and employees is a cap on salary sacrifice schemes which allow workers to put some of their pre-tax earnings into their pension pots.

Such schemes are widely used in larger companies and there is concern that cutting them will mean less generous workplace pensions in the years to come.

What the government wants business to hear is that it is on their side, that it knows a lot was asked of them last time, and that this time they are being spared, even helped at the margin where possible.

After months of anxious waiting business may then breathe a collective sigh of relief.

According to a recent survey by Barclays, 55% of business leaders say they are delaying investment decisions until they have seen the Budget. But 43% say they expect to increase investment after it, a sign of possible pent-up optimism.

But confidence is still very fragile. The chancellor will need to handle with care.