One third of SMEs will have to raise prices this year as NIC hike bites

A third (33%) of SMEs say they will have to raise prices this year as a result of the Government increase in National Insurance Contributions (NIC) for employers.

More than four-in-ten of the UK’s small and medium-sized businesses (SMEs) admit that the government’s increase in NIC for employers will negatively impact them, with nearly a fifth (18%) saying the negative impact will be significant. As a result of the NIC hike, a third (33%) of business leaders said they will or already have had to increase the price of the goods or services they are offering.

New research from the specialist lender Shawbrook sheds light on how SMEs are feeling at the start of 2025, revealing their thoughts on the latest policy decision by the government and how they will respond. When asked if they felt the government prioritised SMEs, nearly a quarter (24%) felt they were a low priority.

Interestingly, older business owners are much more likely to feel the increase in NIC will be negative for their business. More than three-quarters (78%) of business leaders over the age of 55 see the new change as impacting their company badly, compared to just a fifth (20%) of 18-34 year olds, the youngest group surveyed.

Outside of increasing costs, respondents also revealed the other measures they will be adopting this year in response to changing government policy, with three-in-ten (30%) SMEs saying they will have to cut costs. Worryingly for the labour market, more than a fifth (21%) say they will stop hiring in 2025 with 16% admitting they will have to cut job numbers at their organisation.

Neil Rudge, Chief Banking Officer for Commercial at Shawbrook, said “Our latest research, which delves into the attitudes of business owners across the UK, highlights some red flags following the government’s first budget in October. In addition to the rise in National Insurance contributions for employers, a range of other policy changes will also impact SMEs, creating a challenging environment. Many businesses will likely respond by raising prices or reducing staff—strategies that could have far-reaching implications for the broader economy.”

“However, if there’s one thing we’ve learned about SMEs, it’s their resilience and adaptability. Just as they navigated challenges like COVID-19 and rising inflation, they will find ways to overcome the National Insurance hurdle and adjust to the evolving policy landscape. Access to financing will remain critical in 2025, and it’s vital that lenders stay flexible and responsive, offering innovative solutions to help businesses navigate these challenges and achieve their growth ambitions.”