What can small businesses expect from Reeves this spring?
Small businesses (SMEs) are preparing for slumped growth ahead of this year’s Spring Statement, with increasing concerns over upcoming National Insurance (NI) hikes and business rate relief cuts due to come in in April.
Business leaders remain wary of tax increases and spending cuts that could further squeeze SME margins, despite a lower interest rate offering some relief.
The funding gap is widening, with 40 per cent of SMEs forced to pause aspects of their business because of a lack of financial firepower.
Meanwhile over a third risk closure.
“Small businesses are the backbone of the UK economy, but in 2025 so far, the financial landscape is becoming increasingly challenging”, said Hannah Fitzsimons, chief executive of payments data firm Cashflows.
National Insurance hikes
According to new polling from the London Chamber of Commerce and Industry (LCCI), just over half of businesses (51 per cent) believe that the 1st April increase in NI contributions will harm their operations.
The report also found that 47 per cent of businesses are expecting Reeves’ last Autumn Budget measures to hinder national economic growth.
Meanwhile, 46 per cent feared long term damage to London’s economy specifically.
Karim Fatehi OBE, chief executive of LLCI, said: “It should now be clear to the government that businesses are seriously concerned about the effects of increased National Insurance contributions”.
He also warned that firms need “operating conditions conductive to economic growth, rather than measures that curtail their ability to invest in their business, hire new people and train their staff”.
Fatehi urged the government to implement business-friendly policies in its upcoming Spring Statement.
He called for “reform of the unfair business rates system, an Employment Rights Bill that fairly balances the rights of employees with the needs of employers, and a clear pledge not to levy any more taxes on hard-pressed British businesses”.
Autumn Budget policies set to take effect
There are also other regulatory shifts and tax changes affecting SMEs that were announced in the Autumn Budget, that will take effect in April.
“We didn’t see much relief for the UK’s companies, big or small, in the last budget, and there hasn’t been any indication in the next” added Fitzsimons.
“The UK government has limited options to manage current challenges other than cutting expenditure, and this means that the relief that the country’s small businesses need may not be coming.”
As well as a rise in National Insurance contributions, the national living wage will increase by an above-inflation 6.7 per cent, further adding to firms’ wage bills.
Business rate relief for retail, hospitality and leisure will also be reduced from 75 per cent, to 40 per cent.
This will raise overheads for many SMEs.
While the government pledged to cut business rates for these firms from next year, further details remain uncertain.
Fatehi warned: “Businesses are sending a clear message that the measures introduced in the Autumn Budget will not help them invest, innovate and drive prosperity.”
Growth forecasts downgraded
While the Office for Budget Responsibility (OBR) has yet to release its official Spring Forecast, reports suggest the UK, reports suggest the nation’s growth outlook has been downgraded from the 2 per cent forecast in the last Budget.
This could drive available government funds down £10bn, leading policymakers to cut spending further, or increase taxes.
Both options would pose significant challenges to UK businesses.
The Bank of England has also revisited its growth expectations for this year, down from 1.5 per cent, to 0.75 per cent.
Governor Andrew Bailey reportedly warned against being overly optimistic.
He said the economy is still facing “subdued growth prospects and persistent inflation risks”.