The Federation Of Small Businesses recently warned that “small firms face pandemic-level pressures as April costs threat looms.” Its policy director, Paul Wilson, described a potential “cost time bomb” that he says could prove catastrophic.
A House of Commons Business and Trade Committee report found that small firms are facing challenges comparable to Covid-19 – but with no coordinated government support this time. During the pandemic, firms were cushioned by grants, furlough, and emergency measures. Today, they face multiple near-existential threats with little more than silence from Westminster. SMEs account for 99.8% of all UK businesses and form the backbone of local economies and high streets.
The pressures are mounting fast. Late-payment debt hit £112bn at the end of 2024, with nearly half of all invoices paid late, a crisis strangling cash flow for thousands of small firms. Tax compliance costs run to nearly £25bn a year. New National Minimum Wage rates, the removal of Statutory Sick Pay exemptions, lower dividend tax allowances, and rising business rates are all adding to the burden. Energy costs, particularly rising standing charges, which have effectively become a tax on the non-use of supply, are squeezing firms further, with the ongoing conflict in the Middle East adding fuel to the fire.
The jobs market is already feeling the strain. Advertised vacancies fell to 695,000 in January, the first time it has gone below 700,000 since 2021, as employers pulled back on recruitment in response to national insurance and minimum wage rises. Major names have been candid about the impact: JD Wetherspoon flagged a £45m profit drop in its first half due to rising energy, wage and business rate costs; Morrisons said April’s NI and wage changes pushed its costs up by £200m in its last financial year. These are large businesses with deep pockets; the impact on smaller firms is proportionally far greater.
Critics argue the government is deeply out of touch with business realities. As one commentator noted, “not a single member of the Labour cabinet has started a business, or had a consequential job in the private sector – and it shows.” It’s also worth noting that more than 120 business leaders publicly backed Labour before the last election – it’s fair to ask how they feel now about the support they gave the party in 2024!
The Conservative shadow chancellor, Sir Mel Stride, has been blunt: “Businesses couldn’t be clearer: Labour’s tax-and-spend agenda is already costing Britain jobs.” He added “when you punish employers, you punish workers, and working people are paying the price.”
The changes in April aren’t welcome. Whether that’s down to policy choices, global headwinds from Trump’s trade war, or both, the pressure on businesses is very real, and for many, April could be a tipping point.