While it can be argued that business owners always have something negative to focus on – rising taxes, increasing business rates, geopolitical influences impacting the natural flow of business, the general state of the economy – the fact that all of these problems, along with others, have come at the same time is causing some real headaches.
Not unsurprisingly, there are clarion calls for the government to step in and help.
The rise in national insurance seems to be a homegrown problem caused by an incoming government that boxed itself into a corner on election promises of not increasing income tax, corporation tax or VAT. But with few other options, it took a defined course. However, it might have been better to have reversed the employee national insurance rate rather than penalise job-creating employers.
Next, President Trump’s bumbling attempt to ‘Make America Great Again’ – a strapline, by the way, first coined by Ronald Reagan in 1980 – seems to be troublesome for voters at home and catastrophic for ‘innocent’ onlookers elsewhere. His application of tariffs has upended the concept of free trade and made life more expensive for everyone; American 401K pensions fell through the floor, as indeed did the valuations of pension pots worldwide.
It’s made exporters consider new alliances and destinations for goods that were formerly headed to the US market. Jaguar Land Rover and Nintendo are two that stopped exports, temporarily, to the US. Manufacturers in China were puzzling over where already-produced goods could be sent, and while that may have proved a boon for UK (and other) consumers, it’s possible that it would have led to dumping of goods causing upset with domestic manufacturers. However, Trump rowed back and agreed a deal with China to cut tariffs… but they’re still higher than ‘normal’. Next came the threat of a 50% tariff on most EU goods by 1 June, swiftly followed by an extended deadline to the 9 July.
The International Monetary Fund recently cut its 2025 global growth forecasts from 3.3% to 2.8%, with the US likely to be hardest hit and its forecast was cut from 2.7% down to 1.8%.
The UK government is not omnipotent, but it has a number of levers that it can pull to ease matters for UK firms.
Insurer and global risk management firm Howden thinks that one option could be to increase the VAT threshold from the current level of £90,000. As it commented, “this single measure would provide immediate relief to a significant number of smaller businesses, freeing up crucial cash flow and reducing administrative burdens.”
Another change to consider is closer ties with the European Union – the Starmer government announced a number of measures in mid-May. No matter which side a reader sits on, the reality is that Brexit has made life more expensive and complex for importers and exporters on either side of the Channel. Given that the EU is the UK’s nearest neighbour, it seems nonsensical not to trade to the fullest with our continental cousins. This doesn’t have to mean re-entry into the Europen Union, but some form of common-sense rapprochement would ease matters somewhat.
And this is something that the TUC found in a recent survey where it noted “an increasingly unpredictable and volatile global economy.” According to a “nationally representative poll of 5000 people,” 66% of those surveyed want a closer relationship with the EU – with just 20% opposed.
Employment support is also key. It’s surprising that just a year or so ago, the employment market was tilted towards sellers, where employees could make demands that employers had to acquiesce to. Better holiday leave, flexible working, and pay rises were the norm. Many businesses in 2025 are looking to reshape their employment needs as workers have become that much more expensive. On top of that is the Employment Rights Bill, which will grant workers new rights at the expense of employers.
Of course, it’s easy to pontificate from the outside looking in. But unless the government changes course, as it has with the recent U-turn on winter fuel payments, its term in office may not be extended come the next election. And if there’s one thing that hurts electoral chances, it’s the perception of personal wealth.