Small and medium-sized businesses (SMEs) have taken steps to combat the Chancellor’s tax hikes as they brace for further changes in Reeves’ Spring Statement.
Fresh research from Grant Thornton showed 71 per cent of SMEs have formed plans to offload rising employment costs onto consumers – a 15 per cent increase from December.
Almost seven in ten businesses said they planned to reduce or freeze hiring in the next six months as they battled costs.
SMEs have suffered mounting pressure since the Autumn Budget, with the government’s flurry of tax increases and employment reforms hitting business confidence.
Rachel Reeves announced in the Budget that employers’ national insurance contributions would rise by 1.2 per cent, and upped the national minimum wage across all age rates.
Labour’s Employment Bill has created a headache for SMEs, with the radical overhaul of worker’s rights sparking fears for employers that they will be more easily subjected to lawsuits.
However, as SMEs prepare to battle the fallout of the budget, optimism in the mid-market has experienced an uptick, with 85 per cent of firms optimistic about their revenue growth over the next six months.
Giles Mullins, head of core advisory at Grant Thornton UK, said: “How long this confidence will last though remains to be seen.
“As we head towards the Spring Statement, the majority of mid-sized businesses are also expecting the Chancellor to increase taxes on businesses again this year.”
This marks a stark difference from larger firms, who had a ten point decrease in their optimism on the UK economy.
Mullins said larger businesses’ exposure to the “increasingly turbulent international geopolitical environment” is likely weighing upon their future outlook.
“After years of high inflation, interest rate increases and economic and political turmoil, businesses of all sizes are used to adapting to changing cost environments, putting plans in place to protect their operations and reduce the impact to their bottom line and profit growth.
“But mid-sized businesses may be able to adapt more quickly to the shifting economic realities and more easily make changes to mitigate the impact of these employment costs on their operations than larger businesses, who may be faced with a larger wage bill,” he added.
