Small and medium-sized businesses eye rising budgets as they grapple with rising costs and labor shortages

The British Conservative Party has always prided itself on being a strong supporter of business.

But ahead of Chancellor Jeremy Hunt's budget on Wednesday, small business directors have raised concerns about high costs, including interest rates, an impending rise in the living wage, a shortage of skilled workers and difficulties in accessing tax breaks aimed at spurring investment.

The frustration among business leaders was palpable last week when Stephen Phipson, the head of manufacturers group Make UK, called for “political and policy stability”.

“Five prime ministers in eight years and 15 business secretaries in 15 years is not the answer to the problem,” he told a room of business people. “Anyone who runs a business this way is going to go bankrupt.”

Following what Phipson called an “announcement strip”, which included “26 changes to corporation tax since 2019”, directors of three companies from the hospitality, manufacturing and recruitment sectors described the challenges they faced.

hospitality

“I do not think so [the government] Julie Gingell, general manager of two bars and three Starbucks franchises in the London Docklands, which employ about 150 people, said.

“If governments don't realize that we need a little support in the short term to create more wealth in the long term, then they are actually our biggest impediment to growth,” she added.

Ginger said the past few years have been “like business boot camp” for directors, dealing with the combined challenges of the pandemic, soaring energy prices, high inflation and rising interest rates.

She added that the rise in the national living wage in April would have a knock-on effect on higher wages, erasing profits from one of her businesses.

She is also concerned about an expected 6 per cent increase in business rates for high street businesses and wants measures to offset rising costs.

Ginger said the debt small businesses like hers have taken on from borrowing money to survive the pandemic is another major issue, especially after interest rates have risen sharply over the past two years.

“Last year, even though we paid off one-fifth of our COVID-19 loans, we still paid one-third more in interest,” Ginger said, adding that gaining more time to repay the taxpayer-supported pandemic Illness loans will help businesses focus on growth.

“Relieving the hangover from COVID and the debt that we still have will allow us to have more flexibility and potentially start investing a little bit earlier, despite these financial pressures that the government is putting on us,” she said.

manufacturing

Mitchell Barnes, founder and chief executive of RYSE 3D, a manufacturer based in Shipston-on-Stour, Warwickshire, said the high cost of borrowing meant “many times the only solution It’s innovation.”

Barnes said there should be more government support to encourage capital spending and research and development. Barnes' company makes parts for high-performance “supercars” – top-end luxury sports cars.

Such support must also be made more accessible, he said, adding that he faced “a lot of pushback” when submitting applications for R&D tax credits. “We hired a consulting firm to do the R&D claims for us because we didn't have time to refute them,” he said.

Mr Barnes welcomed the full-fee tax cuts made permanent by the Chancellor in his Autumn Statement.

He added that big companies that benefited from Hunt's announcement in November of more than £2 billion in funding for the car industry should spend the money on UK suppliers. “Otherwise, you might as well give it to China and Europe.”

Barnes aims to increase its headcount from 15 to 70 employees this year. He said he would have to use “very unorthodox” methods to do this because of skills shortages.

“Because we're always trying to find capable manufacturing people, we actually… hire people who have worked in coffee shops or restaurants” who are used to following processes within set timelines, he said. , and can be trained.

recruitment

“We know there is a shortage of skilled workers out there,” said Nella Share, director of MET Recruitment in Dudley, West Midlands, which employs 23 people.

She said things have returned to a more normal state after the pandemic caused labor shortages and a hiring boom. Until then, “it's very difficult to find the right candidates.”

Share, who recruits across a range of industries including manufacturing and sales, wants to see an end to the tax cliff that has saddled middle-income families on child benefit with huge marginal tax rates.

“It's increasingly difficult for working parents. . . . The current scheme is not practical for single-parent families,” she said.

She added that planned legal changes that would force employers to consider employees' requests for flexible working could also help tap “a pool of economically inactive people”.

Hunt is expected to cut income tax or national insurance. Share said these tax reductions were “always a positive” for businesses focused on keeping people in employment, before warning that a penny less in the pound would only have a limited impact during the cost of living crisis.

Share, whose new staff typically earn between the minimum wage and £65,000 a year, said any measures to reduce the cost of car insurance and fuel duty would be welcome. Mr Hunt is expected to freeze fuel taxes, which have not been increased since 2011.

Share agreed with Gingell that the previously announced national living wage rise would pose a huge threat to small businesses, with one business telling her that its wage bill was about to increase by £50,000. “This will bring them to the wire,” she said.