Confidence in Government among UK small and medium-sized enterprises (SMEs) remains relatively stable, but new research suggests this sentiment may deteriorate without targeted action in the upcoming Autumn Budget.
A survey of 1,000 SME leaders commissioned by Paragon Bank found that 42% of respondents want the Government to prioritise employee-related taxes and costs. Other areas of concern include business tax reform (36%), business rates (35%), innovation and investment incentives (30%), skills and training (27%), and access to finance (26%).
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The findings indicate that SMEs have been disproportionately affected by measures introduced in the previous Autumn Budget.
Employer National Insurance Contributions (NICs) increases impacted 73% of SMEs, followed by the rise in corporation tax (69%), the national minimum wage increase (64%), and changes to capital gains tax (59%).
Operational costs were identified as the most pressing challenge by 47% of respondents, with employment costs (36%) and access to finance (29%) also cited.
Despite these pressures, 45% of SME leaders rated the Government’s support in its first year as “good”. However, sectoral differences were notable: only 15% of construction firms shared this view, compared to 61% in farming and agriculture.
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By GlobalDataConfidence in the Government’s understanding of sector-specific needs also varied, with 61% of SMEs expressing some level of confidence overall. In contrast, only 24% of those in arts and entertainment felt the Government understood their sector, compared to 46% in education.
Looking ahead, 65% of SMEs reported optimism about their own business prospects over the next 12 months, although only 47% expressed similar confidence in the broader UK economy.
Phil Hughes, Deputy Managing Director of Paragon SME Lending, noted that SMEs are facing “challenging operating conditions” and emphasised the need for clarity from the Chancellor. “While SME sentiment towards Government is currently somewhat favourable,” Hughes said, “policymakers shouldn’t count on it for long.” He added that “ongoing Budget uncertainty” is contributing to the strain on businesses and called for measures to “ease the burden of increasing operational costs.”
