Instead of allowing SMEs to thrive, Labour is punishing them

From day one, this Labour government has prioritised the interests of unions and the public sector over the businesses that actually generate jobs and growth, says Danielle Dunfield-Prayero

Labour’s true colours are now on full display. Despite years of warm words to business in the run-up to the General Election, their instincts remain unchanged: the public sector comes first, while the private sector is treated with suspicion – if not outright hostility. Business is not seen as a driver of prosperity but as a piggy bank to fund ideologically driven policies. No one is paying a higher price than the small and medium-sized enterprises (SMEs) that form the backbone of the British economy.   

From day one, Labour has introduced policies that make wealth creation harder, focusing relentlessly on redistribution instead. For instance, they have hiked the minimum wage, expanded employment rights in ways that deter hiring, and increased national insurance contributions – each decision designed to prioritise the interests of unions and the public sector over the businesses that actually generate jobs and growth.   

Changes to employment law, such as day-one unfair dismissal rights, additional paid leave, and expanded sick pay entitlements, may sound good on paper, but they make hiring riskier, especially for SMEs. Smaller businesses need flexibility to manage their workforce, yet Labour’s approach has created an environment where hiring new talent is a gamble they won’t take. So, faced with the prospect of being unable to manage underperforming staff, many SMEs will avoid hiring altogether or even reduce their existing workforce. The very workers these policies claim to protect will be the ones who suffer most.   

Red tape is suffocating SMEs

Beyond employment law, the regulatory burden is growing at an alarming rate. Labour’s red tape is suffocating SMEs, extending beyond workers’ rights. Compliance costs are rising, planning and licensing processes are becoming more cumbersome, and businesses are drowning in paperwork to stay afloat. For SMEs lacking the legal and HR resources of larger corporations, this bureaucracy is not just frustrating – it is existentially threatening.   

Then there’s the tax burden. The hike in national insurance is nothing short of a tax on jobs, stripping SMEs of their ability to reinvest, grow or offer competitive wages. Instead of fostering an environment where businesses can thrive, Labour is actively punishing them.   

Contrast this with the Conservatives’ record. While they didn’t get everything right, they left office with Britain as the fastest-growing economy in the G7. Labour has already squandered that momentum – business confidence is down, growth has stagnated, inflation is rising and unemployment is likely to creep up. This is not an accident; it is the inevitable result of policies that treat business as an afterthought rather than a priority.   

The hike in national insurance is nothing short of a tax on jobs, stripping SMEs of their ability to reinvest, grow or offer competitive wages. Instead of fostering an environment where businesses can thrive, Labour is actively punishing them

Instead of strangling SMEs, Labour should support them. That means cutting national insurance for employers, reducing business rates, and providing targeted tax relief. It means slashing red tape, fast-tracking planning applications, and ensuring SMEs can access new markets through export incentives and digital transformation. It means prioritising skills training and strengthening apprenticeships to provide a stable and reliable workforce.  

A pro-SME agenda is not just about economics – it’s about the fabric of our communities. Family-run businesses, independent shops and local manufacturers don’t just create jobs; they define our culture and drive Britain forward. If Labour fails to recognise their value, it won’t just be the businesses they courted that suffer – it will be the millions of people who depend on them every day.   

With the Spring Statement approaching, the government has an opportunity to change course. They should scrap the jobs tax, roll back damaging employment legislation, and put SMEs at the heart of their economic strategy. If they don’t, they will be held accountable – not just by business owners but by every worker and consumer feeling the impact of their misguided policies.   

Danielle Dunfield-Prayero is chair of the new Conservatives For Business network