Chancellor Rachel Reeves has now set out her Budget which will increase taxation on hundreds of thousands of individuals and businesses. Her plans will only be judged on how the UK and Scottish economies manage to deliver sustainable levels of growth and employment.
Prior to her official House of Commons statement, and after a raft of press briefings, a fog of pessimism was settling in and influencing SME decision-making, with many businesses taking pre-emptive action, according to Rathbones, a wealth and asset management group.
In a poll of more than 1,000 founders, owners and senior executives of small and medium sized businesses, Rathbones found that 40 per cent had made or were considering strategic changes in anticipation of the Budget.
Among those who have already acted, almost a third (32 per cent) had cut costs or restructured, while 31 per cent had delayed hiring.
Not all changes had been defensive — around 30 per cent had expanded into new markets or regions, and 29 per cent had launched new products or services to strengthen their position ahead of potential policy shifts.
The underlying cause of this strategic shift is widespread concern about tax increases. Seventy per cent of respondents identified rising business taxes as their biggest worry, with one in eight (12 per cent) fearing increased regulation and one in seven (14 per cent) reduced support from government.
The survey found nearly half (46 per cent) believed the Budget would be bad for business, with only one in five (22 per cent) expecting a positive Budget for businesses. More than a third (35 per cent) believed income tax was one of the two areas most likely to be targeted for increases, with 24 per cent pointing to capital gains tax or VAT.
The research also revealed a growing disconnect between SMEs and the government. Sixty two per cent of respondents felt the government did not understand the needs of entrepreneurs and SMEs. Among founders and entrepreneurs, that figure rises to 82 per cent.
Ade Babatunde, financial planning director at Rathbones, says: “Many are worried about a repeat of last year’s Budget, which saw increases to Employers’ National Insurance, and are preparing for the worst.
“The UK Government has spoken at length about the importance of getting Britain growing, but as yet has offered very little to help those starting and seeking to build businesses, such as tax relief, targeted support, or policies that reflect the realities of running a small business today.”
