More than four in ten small and medium-sized enterprises (SMEs) in the UK say the government’s increase in National Insurance Contributions (NIC) for employers will negatively impact their business, according to new research from specialist lender Shawbrook. Nearly a fifth (18%) expect the impact to be significant.
The findings highlight the strain on SMEs at the start of 2025, as business leaders react to recent policy decisions. A third (33%) of firms say they will or already have raised prices in response to the NIC hike, while nearly a quarter (24%) believe the government does not prioritise small businesses.
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Older business owners are more likely to feel the pressure. More than three-quarters (78%) of SME leaders over 55 say the NIC rise will negatively affect their business, compared to just a fifth (20%) of those aged 18-34.
Beyond price increases, many SMEs are making further adjustments to cope with policy changes. Three in ten (30%) expect to cut costs, while more than a fifth (21%) plan to freeze hiring in 2025. A further 16% anticipate reducing staff numbers.
Neil Rudge, chief banking officer for Commercial at Shawbrook, warned that the changes could have far-reaching consequences.
"In addition to the rise in National Insurance contributions for employers, a range of other policy changes will also impact SMEs, creating a challenging environment. Many businesses will likely respond by raising prices or reducing staff—strategies that could have wider economic implications," he said.
Despite these pressures, Rudge noted that SMEs have shown resilience in previous crises. He stressed that access to finance will be key in 2025, with lenders needing to offer flexible support to help businesses adapt and grow.
