Federation of Small Businesses has warned that a sharp rise in costs from April could push many small companies to the brink, calling on the government to intervene in next month’s Spring Forecast to avert closures, job losses and a slowdown in entrepreneurship.
In less than two months, small firms face a convergence of higher energy bills, rising business rates, increased employment costs and changes to Statutory Sick Pay, largely driven by recent policy decisions. The FSB said the scale and speed of the increases were unprecedented and risked undermining the UK’s 5.7m small businesses and self-employed people.
New research from the group shows that 35 per cent of small businesses are planning to close or scale back over the next year, compared with just 21 per cent expecting to grow. The outlook is particularly stark in consumer-facing sectors, with 41 per cent of wholesale and retail firms and 45 per cent of accommodation and food businesses planning contraction or closure.
Labour costs remain the biggest pressure point. Further rises in the National Living Wage in April, combined with higher employer National Insurance contributions, will increase payroll bills despite the Employment Allowance. The FSB estimates that a small employer with nine staff on the minimum wage will see annual employment costs rise by £25,850 between January 2025 and April 2026 — equivalent to hiring an extra worker — while employer NICs will increase by £4,400, or 46 per cent. It is calling for the Employment Allowance to be uprated to cover the NICs costs of four minimum-wage employees.
Business rates are also set to rise for many firms in England following the commercial property revaluation, changes to multipliers and the loss of the 40 per cent retail, hospitality and leisure discount. The FSB estimates an average 52 per cent increase in bills for affected businesses, phased in over three years, and wants relief extended beyond pubs to other small firms.
Energy costs continue to climb, with non-domestic standing charges rising by more than 40 per cent in April, while reforms to Statutory Sick Pay will increase costs by around £110 per worker each year. Dividend tax rates and new compliance requirements will add further pressure.
Tina McKenzie, policy chair at the FSB, said the April cost surge risked “pushing already struggling firms past breaking point” and deterring new start-ups. “Small businesses are resilient — but they are not invincible,” she said, urging the Chancellor to ease at least some of the pressures before costs rise.
