Small businesses have called on the government to “significantly increase” the employment allowance to prevent them having to close after the Budget.
Chancellor Rachel Reeves is set to raise National Insurance contributions paid by employers – despite promising not to raise taxes “for working people” – to help plug a £40bn black hole during the Labor government’s Budget on Wednesday.
The government has already announced that the National Living Wage, which is the minimum that can be paid to someone aged 21 and over, will also increase from April by 6.7% to £12.21 per hour while people aged 16 will be paid £10 per hour. and 20 years – £16.3. % rises.
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Small business owners told Sky News that the combination of rising costs over the past few years, minimum wage hikes and employers’ National Insurance contributions will hit some businesses hard.
Michelle Ovens, founder of Small Business Britain – which supports the UK’s 5.1 million small businesses – warned that more and more businesses will fail if they continue to face this kind of pressure without help from the government.
Hospitality is among the worst-hit industries, she said, while a hair salon owner was on the verge of tears when he described how the changes could be the “nail in the coffin” for his industry.
Ms Ovens and Tina McKenzie, head of policy for the Federation of Small Businesses, called on the government to increase the employment allowance to help ease the pressure and save businesses.
Businesses with a National Insurance bill of less than £100,000 a year could be exempt from paying the first £5,000 of employers’ National Insurance contributions under a scheme called Employment Allowance.
They said increasing the amount small business owners would be exempt from paying National Insurance would help soften the blow.
Rachel Reeves
“We’ve had enough”
Ms McKenzie added that extending business rates relief would also help small businesses. The hospitality sector has received a 75% discount on business rates since 2020, but this is scheduled to end next April.
Toby Vickers, founder of the Salon Employers Association and managing director of The Chapel Salons in London and the South East, said years of increases in VAT, employers’ national insurance and the minimum wage had made his industry “unsustainable” and the latest changes could prove to be the “final nail”. In the casket.”
Vickers, on the verge of tears, told Sky News’ Business Live programme: “It means people potentially lose their homes, lose their apprenticeships, lose their opportunity to grow because you (the government) didn’t listen.”
“We are very emotional, we have had enough.”
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“Small projects are a lifeboat”
Sanjay Agarwal, owner of spice gifts company Spice Kitchen, in Liverpool, told Sky News: 50% increase in maximum bus fares to £3 He has heightened concerns about potential customers’ lack of spending, as his warehouse team relies on public transport to get to work.
He said he would tell the Chancellor: “SMEs are the lifeboat for this country and employ 61% of the country’s workforce, so they really need to be front and center in terms of decision-making.”
Sanjay Agarwal and his mother Sashi Agarwal co-founded the spice group Spice Kitchen. Photo: Spice Kitchen
Ms Ovens, of Small Business Britain, told Sky News: “Small businesses have seen costs rise across the board over the last few years, so raising the minimum wage again will hit some businesses, but not all.”
“Around 16% of small business employees are on the minimum wage, and this is concentrated in industries such as hospitality, which will take a double hit from the National Insurance rise too.
“To keep these essential braves on our high streets and communities, we need to see an increase in the Employment Allowance and continued business rates relief to help with this. If we continue to increase the pressure on small businesses, we will see a continuation of the growing trend of business failure.
“We hope to see more in the budget to recognize the essential role small businesses play in the economy and growth.”
Ms McKenzie, of the Federation of Small Businesses, said: “Raising employers’ National Insurance contributions at the same time as employers adjust to the rise in the National Living Wage is why government needs to step up and significantly increase the Employment Allowance – reducing the taxes employers pay on the job”. Pay is how you get sustainable increases that employees actually feel in their pockets.
Sky News has contacted the Treasury for comment.