Small businesses gear up for growth despite Budget pressures
Small and medium sized enterprises (SMEs) are gearing up for expansion in 2025 despite fears about the state of the economy.
In a survey of over 2,000 SMEs conducted directly after Labour’s Autumn Budget, 81 per cent said they were confident their business would grow next year, with confidence among those employing more than 50 people reaching as high as 86 per cent.
The survey, conducted by alternative lender Thincats, found that in light of the Budget, half of the businesses were confident that the government is creating an environment for business growth.
The three biggest challenges seen as the greatest challenge to businesses were jointly the general economy and cost inflation, which 37 per cent of businesses selected.
These were followed by competition (29 per cent), energy (26 per cent) and staffing costs (23 per cent).
In the government’s inaugural October Budget, Chancellor Rachel Reeves hiked employers’ rate of national insurance by 1.2 percentage points to 15 per cent.
“Post-Budget, we know from speaking to many borrowers and corporate finance advisors that there is both a sense of relief and frustration,” said Ravi Anand, managing director of Thincats.
“The relief is that for the first time in a few years, businesses hare able to plan ahead with some certainty of the broader fiscal and political environment.”
“There is however clear frustration with the impact of changes in NICs and the minimum wage increases, especially in sectors such as care homes and hospitality.”
A majority (53 per cent) of respondent said the changes to employment national insurance contributions would negatively affect their businesses, with 37 per cent intending to increase prices while 31 per cent said they would reduce salary increases.
Meanwhile, a quarter of mid-sized businesses said the changes would actually lead them to explore greater automation and technology to manage costs.
The hikes to capital gains tax and changes to Business Asset Disposal Relief in the Budget had also left 27 per cent of business owners more likely to sell their company earlier.
“Our survey highlights that mid-sized business are highly confident of growing in the next year and government can assist with greater clarity its growth initiatives, particularly assisting with the skills gap,” added Anand.
“Debt continues to be key enabler of growth and the survey highlights the continued rise of alternative lenders as key source of capital.”
Last year, a Thincat survey found SMEs were increasingly struggling with funding difficulties, as three quarters of small businesses were yet to receive external funding.
High interest rates have led banks to reign in their lending, leaving businesses to frequently use other means of acquiring capital.