Cliff Nicholls, a dedicated entrepreneur running two trampoline parks in Tamworth and Bolton, is grappling with the UK government’s recent budget changes. These reforms, aimed at supporting low-paid workers through initiatives like the National Living Wage, are unintentionally causing significant strain on small businesses like his. The increase in national minimum wage, coupled with reduced national insurance thresholds and higher business rates, has prompted Cliff to make tough decisions, such as cutting operating hours and redundancies, to stay afloat.
The new policies lower the threshold for employer National Insurance Contributions (NICs) from £9,100 to £5,000 annually, while increasing the NICs rate from 13.8% to 15%. These changes disproportionately affect businesses employing lower-paid workers, adding nearly £800 in NICs for each employee earning around National Living Wage levels. Additionally, business rates for retail and leisure sectors are set to rise, with Cliff facing an extra £55,000 to £60,000 annually in business rates, a burden he finds more challenging than NIC increases.
The impact extends beyond Cliff’s business, with economist Nye Cominetti highlighting how these changes disproportionately affect low-paid workers. Statutory sick pay extensions and other employment rights reforms add further costs, estimated at £5 billion annually for businesses. Such pressures are causing small business confidence to plummet, as shown by the Federation of Small Businesses, with many entrepreneurs considering closures or hesitant to invest.
Economic indicators suggest these budget measures are affecting inflation, rising to 3% in early 2025. This trend is attributed to businesses passing added costs to consumers, a pattern expected to continue as over half of surveyed companies plan to raise prices. Lord Wolfson of Next warns that these changes could hinder workforce entry, particularly in sectors like retail, which are already experiencing employment declines in manufacturing, retail, and hospitality.
The aftermath of the budget announcement shows a shrinking workforce and increased voluntary business closures, indicating severe challenges for employers. While not solely due to budget changes, these trends reflect the broader economic pressures faced by businesses, prompting calls for phased tax changes to mitigate job losses.
In response, HM Treasury defends its budget as a strategic move to stabilize the economy and boost growth, emphasizing measures like corporation tax caps and business rate cuts. However, the reality for entrepreneurs like Cliff and numerous small businesses reflects a growing struggle to adapt to these policies, underscoring the delicate balance between wage support and business viability.
