The UK Conservative Party has traditionally prided itself on being strong pro-business.
But ahead of Chancellor Jeremy Hunt's budget on Wednesday, small business managers expressed concern about rising costs – including interest rates – an impending rise in the living wage, a shortage of skilled workers and difficulty accessing tax breaks aimed at fueling investment.
The frustration felt by business leaders was evident last week when Stephen Phipson, chairman of manufacturers group Make UK, called for “political and political stability”.
“Five prime ministers in eight years and 15 business ministers in 15 years is not a recipe for achieving this,” he told a hall of businessmen. “Any of you running businesses like that would have gone bankrupt.”
After what Phibson calls a “rollercoaster,” including “26 changes to corporation tax since 2019,” directors of three companies from the hospitality, manufacturing and employment sectors describe the challenges they face.
hospitality
“I don “t think so [the government] “We are really sitting down and talking to small businesses in any detail about the pressures we are facing,” said Julie Gyngell, managing director of two pubs and three Starbucks branches in London's Docklands, which employs around 150 people.
“Without the government realizing that we need a little support in the short term so we can create more wealth in the long term, they are actually the biggest impediment to our growth,” she added.
The past few years have been “like business boot camp” for managers dealing with the combined challenges of the pandemic, rising energy prices, rising inflation and rising interest rates, Gingell said.
She added that the increase in the National Living Wage due in April would have a knock-on effect on higher pay bands, wiping out profits at one of her companies.
It is also concerned about the expected 6 per cent rise in high street business rates, and hopes measures will be taken to offset increases in costs.
Gingell said the debt small businesses like hers are taking on as they borrow to survive the pandemic is another major concern, especially after the big jump in interest rates in the past two years.
“Last year, we paid a third more in interest even though we paid off a fifth of our Covid loan,” Gingell said, adding that allowing more time to repay their taxpayer-backed pandemic loans would help companies focus on growth.
“Our Covid relief and the debt we still have will allow us to have a little more flexibility and maybe start investing a little earlier, even though the government is putting these financial pressures on us,” she said.
manufacturing
The high cost of borrowing means “often the only solution is innovation,” said Mitchell Barnes, founder and chief executive of RYSE 3D, a manufacturing company in Shepston-on-Stour, Warwickshire.
Barnes, whose company makes parts for luxury sports cars, said the government should provide more support to encourage capital spending and research and development.
Support should also be easier to access, he said, adding that he faces “a lot of opposition” when making claims for R&D tax credits. “We hire a consulting firm to do our R&D claims for us because we don't have the time to fight these claims,” he said.
Barnes welcomed the full tax break which the Chancellor made permanent in his autumn statement.
He added that large companies benefiting from Hunt's announcement of more than £2 billion in funding for the automotive sector in November should spend it with suppliers in the UK. “Otherwise, you might as well take that and go and give it to China and Europe.”
Barnes aims to expand its workforce from 15 to 70 this year. He said he would have to use “very unconventional” methods to do so due to a lack of skills.
“Since we were struggling to find competent manufacturing staff, we actually… hired people who work in cafes or restaurants,” he added, “who are accustomed to following the process within a set period of time and can be trained.”
employment
“We know there is a shortage of skilled workers,” said Neela Sher, director of MET Recruitment, a 23-strong company in Dudley in the West Midlands.
She said that after the labor shortage and the employment boom due to the epidemic, things have returned to normal. Even then it was “very difficult to find the right candidate.”
Scheer, who recruits across a range of sectors including manufacturing and sales, would like to see an end to the tax cliff edge that burdens middle-income families receiving child support with huge marginal tax rates.
“It's getting more difficult for working parents… The current scheme is not practical for single-parent families,” she said.
She adds that a planned legal change to force employers to consider flexible working requests from employees may also help tap into “a group of economically inactive people”.
Hunt is expected to cut income tax or National Insurance. Scheer said cuts in these taxes were “always positive” for businesses focused on bringing people into work, before warning that a fall in sterling would only have a limited impact during the cost of living crisis.
Scheer, whose recruits generally earn between the minimum wage and £65,000 a year, said any measures to reduce the cost of car insurance and fuel surcharges would also be welcome. Hunt is expected to freeze fuel excise duty, which has not been raised since 2011.
Share agrees with Gingle that the previously announced increase in the National Living Wage will pose a major threat to small businesses, one of which has told her the wage bill is about to rise by £50,000. “He'll take them to the wire,” she said.
