From National Insurance and corporation tax to wage increases, SMEs report sizeable pressures on margins and investment plans. Without targeted action, the Government risks undermining the very businesses that underpin UK economic output.
Is this the most dragged out, delayed government budget ever? For the nation’s SMEs, it certainly feels that way. With speculation swirling around tax reforms, covering everything from inheritance and property to business rates and capital gains, it’s no wonder smaller employers are feeling under siege.
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Throughout my nearly 30-year career across the UK, Europe and beyond – and now as MD of Paragon Bank’s SME Lending division – I’ve seen British businesses demonstrate remarkable resilience. But recent fiscal measures have placed increasing strain on SMEs, with our latest survey of 1,000 SME leaders revealing that 73% have felt the impact of the Employer National Insurance Contributions increase, with 69% affected by the corporation tax rise and 64% by the national minimum wage hike.
These pressures are compounded by external challenges. Two-thirds (66%) of SMEs cite global economic uncertainty as a major concern, while supply chain disruption (62%), late payments (59%) and increased post-Brexit administration (57%) continue to weigh heavily on day-to-day operations. Nearly half (47%) of SME leaders told us that rising operational costs are their biggest challenge, with employment costs (36%) and access to finance (29%) also high on the list – perhaps unsurprising given how underserved SMEs often are by high street lenders.
Despite these headwinds, SMEs are persevering through. Over a third (36%) have responded by increasing prices, and 22% have implemented hiring freezes to protect cash flow. Encouragingly, 30% are investing in new technologies or automation, 27% are exploring new markets and 24% are prioritising staff training to strengthen capability. However, some told they have had to scale back planned investments (28%) or even make redundancies (16%) as they navigate these turbulent times.
Optimism about the UK economy remains subdued, with less than half (47%) of SMEs feeling positive about the next 12 months. When asked which policy areas they want the Government to prioritise in the Autumn Budget, employment costs and tax top the agenda for 42% of respondents, followed by business tax reform (36%) and business rates (35%). Other priorities include innovation and investment incentives (30%), skills and training (27%) and access to finance (26%).
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By GlobalDataSmall and medium-sized enterprises form the backbone of our economy, responsible for over half of all business turnover. Whilst their successes fuel prosperity and stability across the country, their struggles have the potential for far-reaching consequences for jobs, communities and the wider nation’s growth.
This Autumn Budget presents a vital opportunity for the Government to create a fairer environment for SMEs. Whilst I recognise these are difficult times, the Chancellor’s priority must be to provide SMEs with certainty and ensure they are not left bearing an unfair share of the burden. Our nation has a proud history of successful entrepreneurialism – it’s time the Government champions it with more tangible support for our SMEs.
