As the UK Government prepares to announce its Autumn Budget, a growing number of small business owners are raising alarms over the potential impact of rising employment costs. New research has revealed that many are considering price hikes or delaying hiring as a response to any further increases in employment-related taxes, including National Insurance contributions (NICs) and other levies.
The Growing Pressure on Small Businesses
According to a recent survey by Employment Hero, half of small business leaders (49%) would contemplate raising prices if employment costs rise in the upcoming Budget. This comes at a time when many firms are already grappling with multiple financial pressures, including the end of business rates relief, rising packaging costs, and adjustments to the minimum wage.
In the survey of 1,000 senior business leaders, a third (33%) indicated they would delay hiring, while nearly a quarter (24%) would consider making redundancies. These figures highlight a worrying trend: small businesses, which employ the majority of the UK’s workforce, are at risk of being caught between rising costs and stagnant growth.
The uncertainty surrounding the upcoming Budget has led to significant concern. Over half of business owners (59%) stated that they feel the Government’s decisions rarely reflect the needs of small businesses. Furthermore, 86% of respondents expressed anxiety about how the Budget would affect their companies in the long term. This sentiment reflects a wider frustration within the business community, with many arguing that the Government’s tax policies could stifle growth at a time when the economy is still recovering.
Rising Employment Costs: A Double-Edged Sword
The potential for increased employment costs, such as higher employer NICs, is one of the key issues businesses are bracing for. These changes are seen as essential by the Government for addressing fiscal imbalances and boosting economic growth. However, small businesses are warning that such measures could have the opposite effect.
Kevin Fitzgerald, Managing Director of Employment Hero UK, pointed out that increasing the tax burden on small businesses has a domino effect: higher costs lead to higher prices, fewer jobs, and ultimately less money in people’s pockets. Fitzgerald argues that small businesses are the backbone of the UK economy, and making life harder for them would hamper the country’s recovery. He called on the Government to rethink its approach and focus on reducing the burden on businesses in the upcoming Budget.
Data from Employment Hero’s platform suggests that businesses have been resilient despite the challenges posed by the last round of fiscal reforms. However, year-on-year employment growth remains subdued, and many business owners are concerned that further tax increases could derail any progress made in the labour market. The most recent jobs report shows a 2.3% rise in employment in October, but the overall trend still indicates a slower recovery than pre-2025 levels.
Balancing Growth and Stability
As the UK economy continues its recovery, balancing the needs of businesses and the demands for fiscal responsibility has become an increasingly complex task for the Government. Experts argue that while increasing taxes may be seen as a solution to the national debt, the repercussions for small businesses could be significant.
Julie Fisher, CEO of Simply Business, has called for measures that would support small businesses more directly, including reducing corporation tax for small profits and reversing recent increases to employer NICs. Such steps, she argues, could ease the financial strain on small businesses and enable them to reinvest in growth, rather than focusing on survival.
The upcoming Budget presents a crucial moment for the UK Government to address these concerns. Whether it chooses to increase employment-related taxes or offer more support to small businesses could have profound implications for both the job market and the wider economy.
