Chancellor’s Budget ‘could cripple small businesses’ – London Business News | Londonlovesbusiness.com

Following a ‘painful’ budget for business which comes on the back of Labour’s ‘Making Work Pay’ New Deal, the National Enterprise Network (NEN) has called on the government to remember its pledge to back the country’s 5.6 million, micro and small businesses as a key part of its ‘pro growth’ agenda.

Chancellor Rachel Reeves’ long-anticipated Autumn budget on Wednesday unveiled a raft of new measures to achieve the £40m tax hike she said the country needed – with more than half the taxes being raised from employers.

The measures include a significant increase in National Insurance Contributions (NICS) for employers from 13.8% to 15%, which follows a pre-budget announcement of increases in the minimum wage of 6% together with jumps in wages for younger staff and apprentices.

The National Enterprise Network is the country’s leading representative of business support for micro, small and start-up businesses and its chair, Alex Till, said he was concerned the increased costs could cripple small businesses, turning the positive focus on growth to negative pressures which could ultimately force small business owners out of the market.

“We must remember our micro and small businesses owners aren’t making huge profits like many corporates and they can’t just absorb these costs – they are the faces in our local communities who are providing much-needed local jobs and local investment.

“Combined with the incoming legislation in the Making Work Pay deal which will increase employment admin and costs yet further, restrictions on investments and reductions in some business support funding, it feels like yet another burden on the small businesses who form the backbone of our country’s economy and will undoubtedly put many companies at risk.”

The UK’s MSME (micro, small and medium-sized enterprises) is one of the country’s largest sectors, accounting for 50% of the country’s GDP, 50% of its growth and 75% of its innovation as well as 33% of overall employment – the equivalent of nine million employees.

The budget announcements follow recent research by the National Enterprise Network whose latest Barometer survey revealed that over 75% of small and micro businesses were already concerned that increases in the cost of energy, goods and services and staff wages were making their operations unsustainable. That message was underlined by recent figures from the Department for Business and Trade which revealed a 56,000 drop in the number of small businesses in the UK between early 2023 and early 2024, including a 0.5 per cent fall in the number of people employed in small businesses.

Alex added: “The big issue for me is that the government needs to focus on what really needs to be done to make work pay across the board – both for employees and the businesses themselves. With all the increases in costs on the micro and small business owners, many of them may just decide they cannot make the new business landscape work for them and we will see more closures and fewer of the innovative, entrepreneurial ground-up businesses we need to provide real jobs and grow the economy.

“The government’s focus should be on what can be done to uplift these businesses – a very small % shift in growth across the 5.6million micro businesses in our communities would increase the country’s productivity and wealth significantly.”

And although there was some good news for small business owners – an uplift in the amount they can claim back off their National Insurance bill – there was also disappointment that the current 75% relief on business rates, which are charged on most non-domestic properties such as shops, offices, pubs and factories and was due to expire in April, would be replaced by a 40% discount for retail, hospitality and leisure companies next year.