Small and medium-sized businesses have been asking the government to ‘significantly increase’ employment allowances to prevent them from going out of business due to budget constraints.
Prime Minister Rachel Reeves is set to increase national insurance premiums paid by employers on Wednesday, despite promising not to raise taxes “for workers” to plug a £40 billion black hole in the Labor government’s budget.
The government has already announced the minimum living wage payable to over-21s, which will rise by 6.7% to £12.21 per hour from April, and £10 (£16.3) per hour for those aged 16 to 20. am. % increase.
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Small business owners told Sky News that the high costs of the past few years, combined with increases in the minimum wage and employers’ national insurance premiums, will hit some businesses hard.
Michelle Ovens, founder of Small Business Britain, which advocates for the UK’s 5.1 million small businesses, warned that more and more businesses would fail if they continued to face this kind of pressure without government help.
She said hospitality was one of the industries that would be hit hardest, and one hair salon owner was almost in tears as she described how the changes could be the “nail in the coffin” for her industry.
Mr Ovens and Tina McKenzie, policy chair of the Federation of Small Businesses, both urged the government to increase employment benefits to ease the pressure and help keep businesses afloat.
Companies paying less than £100,000 a year in National Insurance contributions can get the first £5,000 of their employer’s National Insurance contributions waived under a program called Employment Allowance.
Increasing the amount exempt from small businesses paying National Insurance would help soften the blow, they said.
Rachel Reeves
‘We had enough’
McKenzie added that extending business rates relief would also help small businesses. The lodging industry has been offering a 75% discount on business rates since 2020, which is scheduled to end in April next year.
Toby Vickers, founder of the Salon Employers Association and managing director of The Chapel Salons in London and the South East, said years of increased value-added tax (VAT), employers’ national insurance and minimum wages had caused the industry to struggle. It said it had become “unsustainable” and that recent changes could lead to: Be the “last nail in the coffin.”
Mr Vickers, on the verge of tears, told Sky News’ Business Live programme: “Potentially people will lose their homes, their apprenticeships and their opportunities to grow. Because you (the government) didn’t listen. ”
“We are very emotional. We have been through enough.”
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‘Small and medium-sized businesses are lifeboats’
Sanjay Aggarwall, owner of Liverpool-based spice tin gift set company Spice Kitchen, told Sky News: 50% increase in bus fares up to £3 Warehouse teams now use public transport to get to work, adding to concerns that potential customers will spend less.
He said he would tell the Prime Minister: “Small businesses are this country’s lifeboat and they employ 61% of the country’s workforce, so they really need to be front and center in terms of decision-making.”
Sanjay Aggarwall and his mom Sashi Aggarwal co-founded Spice Kitchen spice kits. Photo: Spice Kitchen
Ovens, from Small Business Britain, said this in an interview with Sky News. “Small and medium-sized businesses have been experiencing high costs across the board over the past few years. So raising the minimum wage again would hit some, but not all, businesses hard.
“About 16% of small business employees are paid the minimum wage, and this is concentrated in industries such as accommodation, so they will be doubly hit by the increase in national insurance,” he said.
“If we are to maintain these vital elements of our high streets and communities, we need to increase employment allowances and continue to provide business rates relief to help. If we continue to put pressure on small and medium-sized businesses, the trend of increasing business failures will continue.
“We want to see more in the Budget to recognize the essential role small businesses play in the economy and growth.”
Mr McKenzie, of the Federation of Small Businesses, said: “Increasing employer national insurance premiums while employers adjust to a higher national living wage is why the Government must significantly increase employment benefits to reduce the tax paid by employers. Wages are a way to get sustainable increases that employees actually feel in their pockets.”
Sky News has contacted the Treasury for comment.
