Small businesses forced to raise prices ahead of national insurance jump
The price of small businesses’ goods and services is set to be the latest victim of Rachel Reeves’ national insurance hike, a new survey has revealed.
More than four-in-ten of the UK’s small and medium-sized businesses (SMEs) have said the government’s increase in National Insurance Contributions (NIC) for employers will negatively impact them. Nearly a fifth said the consequences would be “significant”.
Because of this, a third of SME leaders said they plan to or have already increased the prices of the goods or services they offer, according to research by Shawbrook.
The changes to national insurance will be enacted from April 6, 2025 after first being unveiled in the Chancellor’s Autumn Budget.
Reeves’ tax grab will mark a 1.2 per cent increase, with employers national insurance set to be 15 per cent from April.
Job cuts and hiring slowdown expected
Beyond increasing costs, survey respondents said that the changes from the Government will lead to a slowdown in hiring, and even job cuts.
More than a fifth of SMEs said they would stop hiring in 2025, and 16 per cent said they would be forced to make layoffs.
Amidst these struggles, nearly a quarter of SMEs felt like they were a low priority of the Government.
Shawbrook’s chief banking officer, Neil Rudge said the new research “highlights some red flags following the government’s first budget”.
Rudge said: “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.”
He said the resilience and adaptability gained by SMEs through navigating the turmoil of COVID-19 and rising inflation gave hope they could overcome this latest hurdle.