Credit, Collections & Insolvency News
The Chancellor, Rachel Reeves, has delivered her Spring Statement outlining the Government’s economic plans.
Responding to the announcement, Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said “Today’s growth figures are a stark reminder of the urgent need to get the economy moving. The whole of Government must now step up and produce credible, pro-small business plans to achieve that.
“Every Government department bears responsibility for growth and every cabinet minister must come forward at the upcoming spending review with proper plans to back small business growth and therefore growing the economy as a whole. From better programmes to support small business tech adoption, to introducing a Statutory Sick Pay rebate to help cover the extra costs being imposed on small employers, small firms want to see Government money well spent and targeted to support growth.
“FSB’s latest quarterly Small Business Index revealed confidence levels among small businesses at their lowest since the first year of the pandemic. That needs to be turned around, and fast.
“The Chancellor has rightly kept her word not to increase business taxes again and we urge her to go further in her next full Budget and actually lower the tax burden, including delivering on the promises made by Labour in opposition to transform the out-dated business rates system and make it fit for purpose in a modern economy. Freeing up funds for small firms to invest in their business rather than having money swallowed up in high taxes is the best way to achieve growth.
“There should be no doubt that the Government can deliver a better environment for small businesses, including as taxpayers. We therefore welcome the Chancellor’s commitment to open up defence procurement to more small firms. Pressure on the Government’s finances can be significantly eased by opening up contracts across Government to more smaller suppliers – providing greater competition and better value for taxpayers, as well as keeping more of the cash from taxpayer-funded contracts in local economies across the UK. This is a crystal-clear example of how improved commercial acumen can deliver savings while increasing value. Each and every Government department should do the same.
“Many small employers are worried about next month’s rise in employer national insurance contributions (NICs). While the Chancellor’s decision to double the Employment Allowance – as a result of FSB campaigning – will take all employers out of the first £10,500 of the jobs tax, there is a reality that this will only partially shield many from the overall NICs rise, and their bill for employing people will therefore be higher, adding to the overall tax burden.
“For this to be coupled with legislation that makes it more risky and expensive to employ people is a dangerous combination. The ambition to support more people into work is a good one. But there need to be jobs to be filled. The Government needs to listen to the feedback from business on the Employment Rights Bill and change the elements which are most likely to act as a deterrent to job-creation.”
Theo Chatha, CFO at Bibby Financial Services said “The Chancellor’s Spring Statement will be a huge disappointment to the UK’s small and medium sized enterprises. We know 87% of SME business leaders are eager to invest and nearly half were deferring major investment decisions until after today’s Statement.
“Will SMEs feel more confident after today’s announcements? Likely not, and we could see a worrying continuation of this “wait and see” approach as businesses further delay decisions on areas of investment such as machinery, technology and recruitment – resulting in an economic lag for the UK.
“Off the back of an unpopular Autumn Budget and with increased employer National Insurance contributions and business rates set to rise, today’s statement was a missed opportunity to support the UK’s SMEs.”
Stephen Goderski, Partner at restructuring and insolvency firm PKF Littlejohn Advisory said “As the UK continues to navigate a complex financial landscape, the importance of a well-balanced approach to fiscal policy cannot be overstated. While addressing the immediate fiscal challenges, it’s vital that the government also lays the groundwork for long-term, sustainable growth. The plan to recalibrate economic policy in the face of rising borrowing costs and weakened growth projections will be critical in maintaining investor confidence and fostering economic stability.
“Equally, it is essential that any new measures announced in the Statement consider their impact on employment. Businesses are already facing rising operational costs and an increasingly difficult operating environment, so protecting jobs must remain a central priority. Ensuring that businesses, especially those in vulnerable sectors, are given the support needed to retain their workforce is crucial. Economic recovery must go hand-in-hand with job preservation and investment in the future of the UK labour market.
“The need for businesses to adapt and become more resilient in a volatile market has never been clearer. The Statement should set the tone for the fiscal policy ahead, not just the short term, but also the longer term. Businesses large and small across the country will be watching intently to see how the Chancellor’s next moves will impact their sector and their future prosperity.”
Arun Singh, Global Chief Economist, Dun & Bradstreet, said “For businesses across the country, today’s Spring Statement offered little relief. With no major support announced, companies must stay vigilant, particularly as many of the measures announced in the Autumn Budget are set to come into effect in April. This includes an increase to employer national insurance contributions (NICs), a hike in capital gains, business rates and inheritance taxes, as well as an increase in national living and minimum wages. These combined measures are likely to stretch already tight budgets.
“Since last year’s budget, sentiment among UK businesses has soured, and with the economy still sluggish and no significant interventions in sight, many companies remain cautious about the year ahead. However, there are signs of resilience among small businesses—89% expect their profits before tax to rise in Q1 2025, according to our latest Global Business Optimism Insight Report. But while this optimism offers a glimmer of hope, SMEs are still grappling with significant challenges, and the growing uncertainty could push many to the brink, increasing the rate of UK business failures. Access to reliable data is more important than ever, helping SMEs assess risks, plan ahead, and make informed financial decisions in an unpredictable economic climate.
“Looking ahead, if the Office for Budget Responsibility downgrades GDP growth forecasts or investor confidence wanes, the government may be forced to consider further spending cuts or tax hikes. Such measures would only deepen the economic strain, making it even harder for businesses to navigate the coming months.”
Anna Leach, the Chief Economist at the Institute of Directors, said “The Chancellor has rightly responded to a fiscal rules ‘miss’ by taking proportionate action to reduce the deficit and re-build fiscal headroom. This was necessary to ensure market confidence and stability. But the balance of spending and tax measures is rather more tax rich than expected, with £5.6 billion more in tax receipts against £4 billion of spending cuts by 2029-30.
“There are some positives for growth – particularly with the OBR giving planning reform a thumbs up. Defence spending is rightly funded through retrenchment elsewhere – at least for the years in which we have detail. With disability claims having risen twice as fast as measured disability since the pandemic, it makes sense to ensure that welfare spend is directed towards those who most need it.
“However, it is notable that the only element of the welfare package which the OBR has incorporated into its employment forecast actually reduces labour supply in future years. And the OBR notes that previous packages of similar ambition have delivered far fewer savings than anticipated. The OBR plan to give a fuller analysis of the overall welfare reforms in October, but will do so alongside their analysis of the employment rights package – which we judge to significantly increase the cost and risk of hiring.
“A fixation with whether or not this is a fiscal event misses the point. It is clear that a small fiscal rules shortfall has diverted huge amounts of government energy from more productive activity. Once again, fiscal retrenchment is heavily backloaded to the final two years of the forecast, with departmental current budgets actually increasing in nominal terms before that once their NICs compensation is added in. And the OBR judge that the probability of meeting the target is only about 50%. It is clear that the updated fiscal rules are not yet delivering the necessary stability for departmental budgets and therefore for government policy.
“The greater emphasis on applying AI and innovative technology in the defence sector and in government is to be welcomed, given the imperative of improving public sector productivity.”