'Every part of our business is under scrutiny after Budget tax rises'

Small businesses have warned of the challenges that tax hikes and rising costs are having on their operations in 2025.

In her maiden Budget last October, the Chancellor increased national insurance contributions (NICs) for employers and the national minimum wage (NMW).

Firms say these changes will hit them hard from April – when they kick in – while at the same time, rent is high and energy bills are climbing.

And though inflation peaked in 2022, prices on goods and services more generally are still rising now – on top of the increases that businesses have already seen – hitting a 10 month high of three per cent in January.

Mark Williams, CEO of Keystone Brewing Group, which runs several brewing brands, said rising costs are hitting “every corner of the business, from raw materials and energy to wages and operational expenses”.

The 6.7 per cent increase in the NMW, coupled with higher employer NICs, will “significantly” add to the financial strain this year, the 57-year-old said.

He explained: “Every part of the operation is under scrutiny to drive efficiencies and manage costs without compromising on quality.

“Supply chain strategies are being reassessed, and energy-saving measures are being explored, but ultimately, rising expenses are squeezing margins.

“With costs mounting across the board, businesses are being forced to make difficult decisions on pricing, staffing, and investment and without meaningful Government intervention, the pressure to pass costs onto consumers or scale back operations will only increase.”

As well as rising taxes, other business owners have cited rising bills as the biggest strain on their finances.

Beki Stevenson, who started her business Berber Leather with her dad Paul in 2015, said rising energy bills has been the biggest struggle and led to the closure of their store, with the business moving to an online model.

The 36-year-old, from Richmond in North Yorkshire, imports handmade leather goods from Morocco and sells them online. She has one other staff member who works for her.

She said: “From electricity to stock, transport to packaging, even everyday items like coffee and printer paper have seen an increase.

“But I think for our business the biggest cost has been rising fuel bills. The comparison of our monthly bills this year versus three or four years ago is staggering, and this is just for heating and lights in our small office. I feel grateful in a way that we don’t run a business that really uses power.”

Ms Stevenson added: “The overheads are much less for us now with just an office and a warehouse, and it also allows us to be more flexible with staff hours and holidays.

“We have also cut back on shows and events that we would attend such as agricultural and trade shows and Christmas markets as we are finding the consumer spending is much less than it has been previously despite the costs of having a stand at these events increasing year on year.”

She has been taking a smaller wage and cut back on taking personal bonuses to be able to keep investing in the business and offset rising costs without having to pass all of these increases onto their wholesale and retail customers, she said.

One business owner told The i Paper how she is hardly paying herself anything because of the increases in costs she has faced.

Alison Boutoille, 35, founder of CityStack – a project which supports independent pubs – said things have been tough for her business since 2021, but there has been a big spike in price increases recently.

This has left her with no choice but to pay herself a very little salary each month as she reinvests most of her revenues into her business, which she started in September 2021 – a year after moving to the UK from France.

Ms Boutoille, who currently has no employees so isn’t impacted by Reeves’s measures, said: “I have observed a steady increase in most cost sources.

“I have increased the volume of my orders to my suppliers, ordering bigger batches to reduce the unit price increase, resulting in larger stocks for me.

“I have also stopped working from a co-working space and now work more from home and pubs.”

Although for many business owners the increase in employer NICs – rising from 13.8 per cent to 15 per cent from April – is a significant problem, high rent prices have been more damaging, Ms Boutoille said.

She added: “The biggest increases I have faced is in rent, both on a personal level and for the pubs that I work with.

“The increase in employer NICs isn’t as significant as the rent increase, so I believe small businesses should be treated differently and protected from these massive rent hikes.”

Robert Salter, a director at audit, tax and business advisory firm Blick Rothenberg, warned that this pressure on prices will only increase over the coming months.

He said: “This is because those firms which haven’t yet adjusted their prices for the forthcoming wage and NIC rises will need to do this in the next few weeks.

“The fact that the Government gave significant pay rises to various public sector workers without any evidence of improved efficiency via changes to working practices in the Autumn is also helping to push up inflation.

“Private sector employers are competing for workers and if public sector workers wages go up, the private sector will need to match them to attract employees. This is yet another cost that businesses will likely have to pass on to consumers.”