As the Autumn Budget approaches, Britain's small and medium-sized enterprises are voicing growing concerns about carrying an excessive tax burden that threatens their growth and innovation.
The Growing Pressure on British SMEs
New research reveals the stark reality facing UK small businesses, with 73% of SME leaders reporting significant impact from the Employer National Insurance Contributions increase. The survey of 1,000 business owners also found that 69% are struggling with the corporation tax rise, while 64% face challenges from the national minimum wage hike.
John Phillipou, managing director of Paragon Bank's SME lending division, warns that these fiscal measures are taking a serious toll on business margins. "Having spent years working across European markets, I can confidently say the UK has an SME sector to be proud of," he states. "We're a nation of entrepreneurs and an incubator for ideas, but this spirit is being tested."
Multiple Challenges Converge
The research highlights that nearly half of SMEs identify rising operational costs as their primary challenge, closely followed by employment costs and access to finance. External pressures compound these difficulties, with two-thirds of businesses citing global economic uncertainty as a major concern.
Additional burdens include supply chain disruption, late payments, international trade tariffs and post-Brexit administration requirements. Despite these mounting pressures, SMEs demonstrate remarkable resilience and adaptability.
Proactive Responses and Budget Demands
Facing these challenges head-on, over a third of surveyed SMEs have increased prices, while one in five implemented hiring freezes. More positively, 30% are investing in new technologies or automation, with more than a quarter exploring new markets and 24% investing in staff training.
However, defensive measures are also emerging, with 28% scaling back planned investments and 16% making redundancies. This cautious approach reflects the mood among business owners, with less than half (47%) feeling optimistic about the UK economy over the next 12 months.
When asked about their Budget priorities, 42% of SMEs want government action on employment costs and tax. Other key concerns include business tax reform, business rates, innovation incentives, skills training and improved access to finance.
Critical Importance for UK Economy
The Autumn Budget represents a crucial opportunity for the government to demonstrate its understanding of SMEs' value and contribution. These businesses employ 60% of the private sector workforce and generate over half of all business turnover in the UK.
"When SMEs succeed, the nation prospers," Phillipou emphasises. "When they struggle, the effects ripple outwards, impacting jobs, communities and national growth."
While recognising the challenging economic climate and difficult decisions facing the Chancellor, Phillipou stresses the need for SMEs to receive proper recognition in fiscal policy. Potential support measures could include extending business rates relief, increasing the employment allowance to reflect the new national living wage, or expanding government-backed finance schemes.
Specialist lenders like Paragon remain committed to supporting SMEs, but Phillipou concludes that "we need a policy environment that enables, not inhibits, ingenuity. If SMEs are given the tools to succeed, the whole country stands to benefit."
