Colchester drag business fears for future over Reeves’ Budget

It’s been nine months since the Dragonfly Lounge’s stage lights first went on, the music played and its doors opened to everyone in Colchester.

It is an inclusive LGBTQ+ bar and community space that hosts drag cabaret, live music and space for local producers to showcase their crafts.

Co-owner Jo Palmer-Tweed describes herself as an ally of the community.

“The motivation is to provide a safe space for people that’s properly inclusive. So I don’t care if you’re a squaddie, if you are a ‘trans person to be’, whatever you are, you are welcome here.”

It took Jo, also known as Mamma Dragonfly, two years to raise the money to open the venue.

But the business’s future could hinge on Chancellor Rachel Reeves and her Budget when she brings it to the despatch box on Wednesday.

When Reeves delivered the first Labour government Budget in 14 years last October, the former depot in the city centre on Long Wyre Street was being transformed into a night-time venue.

Dragonfly Lounge’s business case was in place.

But before the chancellor had even sat back down in the Commons, Jo realised the monthly outgoings would be going up by £2,000.

“We had a solid business plan; then the last Budget happened and [business] rates changed for hospitality, which did throw us and kind of left us on the back foot. But we are still going.

“We’re surviving.”

Business rates are taxes on commercial property, such as on factories, pubs and shops.

The amount taxed is based on the property’s rental value. Half the money raised goes towards local council services.

In March 2024, the last Conservative government set a 75% reduction in rates for firms including the Dragonfly Lounge, saving small companies about £2.4bn.

But last year, the chancellor announced a significantly smaller 40% business rate relief for these retail, hospitality and leisure businesses.

The government said the support was worth £1.5bn.

Business rates had been protected from inflation and this dispensation had been extended for 250,000 firms, the Treasury explained.

The government also said more than half of employers – all small or medium sized businesses – would either see no change or a reduction in their National Insurance (NI) bills.

But Jo said the NI rise for employers in last year’s Budget had “a chain reaction”.

“Obviously that affected us directly. It’s not huge, but it is an impact. But that rise gets passed on in other ways to us. Our drinks suppliers – who are big companies, for whom that would’ve made quite a big difference – put their prices up.

“So we get that passed on to us again.”

For the Dragonfly Lounge it has meant it is “just about breaking even”.

“It’s very challenging,” continued Jo.

“The night-time economy has been particularly hit in that when people have less disposable income, this is one of the first things that goes because we’re not an essential.

“We’ve definitely noticed over the summer a real drop in footfall and I think that’s common for a lot of hospitality businesses.”

Jo, her staff and her regulars are waiting nervously to see what Reeves will read out from the Commons on Wednesday.

“If there are changes in rates that don’t go in our favour we could potentially be in real trouble,” she admitted.

She is also worried how any increase to income tax will effect footfall, although government sources have suggested that won’t happen.

Can the Dragonfly Lounge survive?

Ahead of another Friday night cabaret, where most tables are booked, Jo said: “Hand on heart, I don’t know. I hope so.”

A government spokesperson said: “Nightlife is vital to local communities, that’s why we’re cutting the cost of licensing, lowering the business rates multipliers for eligible retail, hospitality and leisure and helping more venues offer pavement drinks and al fresco dining, on top of cutting alcohol duty on draught pints and capping corporation tax.”