Small businesses face a cost crunch that could push many to breaking point so the government needs to take urgent action to help, the Federation of Small Businesses (FSB) has warned.
In April, small businesses will be hit by rising energy bills, business rates hikes, minimum wage rises and changes to Statutory Sick Pay which the FSB said “could lead to closures, stalled growth and fewer entrepreneurs willing to start up a business – unless urgent action is taken”.
The business group is calling on the government to announce the following measures to tackle the impact of these costs in the Spring Forecast on 26 March:
- Uprate the employment allowance so it continues to cover the employer National Insurance costs of four employees on national minimum wage.
- Small businesses face a 52% increase in business rates so the three-year support package for pubs should be extended to other small businesses in England’s retail, hospitality and leisure sector, the small business rate relief threshold should be increased to £25,000.
- Small businesses should also be protected from rising business rates bills in Wales, Scotland and Northern Ireland, where similar revaluations and other changes are coming into effect.
- On energy, small firms will see annual standing charges increase by over 40% in April so the government should remove up to 75% of the renewable obligation costs from non-domestic energy bills, mirroring the support that has already been given for households.
- Statutory sick pay (SSP) costs increase from April, with all employees becoming eligible and payments starting from day one of sickness. FSB says this will add around £110 a year for every worker on the minimum rate, so a SSP rebate for small and medium employers should be introduced.
- Dividend tax rates rise by two percentage points in April, taking the basic rate to 10.75% and the higher rate to 35.75%. For company directors, this means lower take‑home pay so the government should defer the increase of the basic rate until April 2027.
FSB policy chair Tina McKenzie said:
“April’s impending cost crunch will make running a small business in the UK more expensive – and that has real consequences.
“It will push already‑struggling small firms past breaking point, deter would‑be entrepreneurs from setting up in business as the numbers no longer stack up, and put the brakes on the small business growth the economy depends on.
“Small businesses are resilient – but they are not invincible. They simply cannot go on absorbing endless cost increases. The local greengrocer who has been serving the community for 60 years, the tech start up that wants to expand and the garage that employs dozens of staff including apprentices – they will all be feeling the pressure and have to make tough decisions off the back of it.
“Many of these hardworking businesses have already been forced to increase prices, lay off staff, or cancel expansion plans.
“Next month’s Spring Forecast is the last chance to take action before the new costs surge. The Chancellor must recognise the huge pressure that our 5.7 million small businesses and self-employed people are under and show she is willing to ease even a fraction of these cost pressures to help stem the tide of these rising costs.”