It’s a sign of the times that coverage of last month’s budget has polarised from nit-picking negativity to full-blown hagiography. My view is not a try-and-fail–to-please-everyone “it’s somewhere in the middle”; it’s a frustration that the budget has been put together by people who don’t quite “get” what it takes to start and run a successful business.
There have been some positive steps taken: the freeze on fuel duty is good news for businesses with high transportation costs while keeping the corporation tax rate at 25 percent and extended business rates relief for retail, hospitality, and leisure sectors provides some certainty for businesses planning their finances.
By promising to fix the budget for a year at a time, the headline Rachel Reeves wants is “stability”. But unless she tackles what I think is the big issue, the long term result may be stability’s evil twin, stagnation.
A costly hiring landscape is bad news
One of the most significant changes for businesses is the increased cost of hiring. The government’s “Make Work Pay” initiative, while aiming to boost worker incomes, will increase employer National Insurance Contributions (NICs). This means it will cost businesses more to employ staff.
At Swoop, we estimate this change will add an extra £40,000 per year to our employment costs.
The difficulty is that businesses don’t vote, people do. So of course, the government will make a noise about the extra cash it’s putting on people’s pockets. On the other hand, the things that make people feel good – meaningful work, economic growth and aspiration – are all things that businesses provide.
While the government’s intentions may be well-meaning, the increased cost of hiring could stifle growth and innovation. Businesses should view their employees as valuable assets and find ways to mitigate these additional costs. This might involve streamlining operations, automating tasks, or exploring alternative hiring models.
Looking ahead, I hope that future budgets will focus on incentivising businesses to hire and grow, rather than imposing additional burdens. By supporting businesses, the government can create a more prosperous economy for all. With a huge majority and five years of government ahead of them, I am hoping that my frustration with the current rules will dissipate in years to come. But as things stand, the Chancellor and her advisors need to listen to the voices of SME owners – we’re key to the growth they want and shaking us down for every last penny is not the way to win our hearts.
Want to learn more about how the budget will affect you?
Swoop hosted a webinar analysing what the budget means for SMEs. Andrea Reynolds and Ciaran Burke, co-founders at Swoop, were joined by Chris Downing from Sage. Watch the recording here.
