Confidence among UK small and medium enterprises (SMEs) in the Government remains relatively strong but could quickly erode if the Autumn Budget fails to address rising costs and taxation pressures, research from Paragon Bank has found.
The survey of 1,000 SME leaders revealed that 42% want the Government to prioritise employee tax and costs in the upcoming Budget.
Other key areas of focus include business tax reform (36%), business rates (35%), innovation and investment incentives (30%), skills and training (27%), and access to finance (26%).
SMEs have been significantly affected by measures from the previous Autumn Budget, with 73% saying they were impacted by the Employer National Insurance Contributions increase, 69% by the corporation tax rise, 64% by the national minimum wage increase, and 59% by the capital gains tax rise.
Nearly half (47%) of respondents cited rising operational costs as their biggest current challenge, followed by employment costs (36%) and access to finance (29%).
Despite these pressures, 45% of SME leaders rated the Government’s support for small businesses in its first year as “good.”
Confidence varied across sectors, with 61% of those in farming and agriculture giving a positive rating compared to just 15% in construction.
When asked whether they felt Government understands their sector’s needs, 61% overall were “very” or “somewhat” confident – though only 24% in the arts and entertainment sector said the same, compared with 46% in education.
Looking ahead, 65% of SMEs said they are optimistic about their own business prospects over the next year, although fewer (47%) feel positive about the wider UK economy.
Phil Hughes, deputy managing director of Paragon SME Lending, said: “SMEs are the backbone of UK business and when they fail, the economy fails. This latest research reveals their clear message to Government: adding more cost and taxation will only hinder growth and innovation.
“As a lender working with 16,000 SMEs at the coalface – from manufacturers and farmers to construction companies and hauliers – we see firsthand the headwinds they face, and whilst they remain as adaptable and ambitious as ever, ongoing Budget uncertainty only intensifies an already challenging operating environment.
“While SME sentiment towards Government is currently somewhat favourable, policymakers shouldn’t count on it for long. To earn long-term confidence the Chancellor urgently needs to give SMEs clarity on how the Government is going to kickstart this promised growth and ease the burden of increasing operational costs.”
