Owners of small businesses have been left teetering on the brink following hikes in National Insurance and the minimum wage which will cost them thousands of pounds.
Chancellor Rachel Reeves announced a slew of new fiscal policies on Wednesday which firms say they will have to shoulder the burden of.
Included in the raft of new proposals was a 6.7 per cent rise in the minimum wage, a rise in employers’ National Insurance (NIC) contribution and a cut in business rates relief.
Businesses have reacted furiously to Labour’s £25billion tax raid and with some warning are considering closing, cutting jobs or moving abroad.
While pubs have said it will be punters who will be left picking up the tab and will not be getting a ‘penny off a pint’ despite the government’s 1.7 per cent cut to draught duty.
Sarah Ashworth says rising staffing costs at her dog day care centre brought by the budget fill her with anxiety as her business will struggle to cope
Owners of small businesses have been left teetering on the brink following hikes in National Insurance and the minimum wage which will cost them thousands of pounds. Pictured: Chaska Bunzli, 39, owns two pubs in London and says it is no longer viable to run a business in the UK
Employers are also facing increased costs from April next year after Ms Reeves announced inflation-busting increases to both the National Living Wage and National Minimum Wage.
The £25billion raid on employers’ NICs came as part of a wider £40billion ‘tax bomb’ unveiled by the Chancellor in her first Budget.
The respected IFS think-tank warned that the £25billion move to increase the headline employer NICs rate and lower the threshold at which it is paid will hit the lowest-paid jobs hardest.
In a post-Budget briefing, the economists pointed out that employers with large numbers on relatively low wages will be disproportionately affected.
That could mean pub and restaurant chains, delivery companies and construction firms, who are also facing an increase in the minimum wage of four times inflation.
Sarah Ashworth says rising staffing costs at her dog day care centre brought by the budget fill her with anxiety as her business will struggle to cope.
The 36-year-old risked her future by quitting her job at Unilever and selling her home to start up Dog Go on the Wirral, Merseyside in 2017.
She now has five dog parks and two day care centres and employs 10 people.
The rise in employers’ National Insurance Contributions and minimum wage will set her back almost £7,500 a year.
‘It is extremely scary and has caused me a lot of anxiety,’ she said. ‘Dog day cares are a licensed activity and there is a requirement to have a certain number of staff per dog and for staff to have qualifications.
‘If staff costs increase this is a cost we can’t cope with. It just feels like another kick in the teeth and it is demoralising.’
Businesses have reacted furiously to Labour’s £25billion tax raid and warned the scale of the tax rises would hit growth and jobs
The 36-year-old risked her future by quitting her job at Unilever and selling her home to start up Dog Go on the Wirral, Merseyside in 2017
Miss Ashworth said the budget will eat away at her ‘already tight profit margins’.
She added: ‘I am a business owner but I am also a worker and I work seven days a week, yet I am the one getting squeezed. It just makes everything so much harder.
‘It is a counterproductive thing to do because it makes employing people less attractive. It means I will more likely do a job myself.
‘It’s not fair, they think we are huge corporations making all this money and we’re sitting at home counting money but margins are tight and we’re trying really hard. It’s absolutely not fair.’
Chaska Bunzli, 39, owns two independent pubs in London and says it is no longer viable to run a business in Britain following the Autumn Budget which has increased his staffing costs by £6,000 a year.
The entrepreneur from Chesire, runs The Victoria in Deptford and The Railway Tavern in Dalston and employs 56 people.
His biggest cost is labour and is concerned about his profit margins, which currently sit at between five to eight per cent, tumbling after the rise in employers’ National Insurance Contributions and minimum wage.
He has to sell an extra 19 pints a day to offset the increased costs brought by the Budget.
‘Any increase in NI and in minimum wage is a big squeeze and there is a false narrative on it not impacting working people,’ he said.
‘Our margins are really tight already so prices will end up going up and consumers will feel it.
Chaska Bunzli, 39, owns two independent pubs in London and says it is no longer viable to run a business in Britain following the Autumn Budget which has increased his staffing costs by £6,000 a year
The IFS said the proportional costs of staff would be increased much more for low earners
‘A rise in NI and minimum wage impacts us on a bigger scale. Now is as hard a time as any to run a small business in the UK. It’s no longer viable.’
He slammed the ‘false headlines’ generated by the 1.7 percent cut in draught duty and said customers would not be getting a ‘penny off a pint in the pub’.
Mr Bunzli said instead, prices would be going up around 30p due to a rise in staffing and supplier costs.
‘No pub anywhere in the country will reduce the price of their pints,’ he added.
‘That big announcement has no impact because the bigger picture is all the other pressures will lead to a 30p increase per pint.’
He has noticed people are already spending less ahead of the busy Christmas period.
‘Thankfully we have a very loyal client base so our bookings are the same but the spend just isn’t there.’
He expects to feel the ‘ricochet’ of the budget in the new year.
His pubs are part of the CityStack initiative which supports independent pubs and helps Londoners socialise within their budget.
Karli Buchling, 37, immediately started the process of moving her luxury pregnancy pillow business to South Africa once she saw Labour win the election in July.
The mother-of-two, who lives in the Cotswolds, claims it won’t be viable to run a business under this government because of the proposed tax hikes.
She says she will generate as much as 40 per cent more profit in South Africa compared to Britain with Natal Comfort and expects to complete the move by mid-November.
‘I was concerned about incoming tax payments from the Labour government. There are bound to be changes and I don’t have wiggle room,’ she said.
‘It is becoming too expensive and with having to possibly pay additional tax, it just doesn’t make sense anymore.
Karli Buchling, 37, immediately started the process of moving her luxury pregnancy pillow business to South Africa once she saw Labour win the election in July
‘Managing a business in the UK is not an option at all because of the costs.’
Mrs Buchling, who earns more than £125,000 a year, started the business in 2017 and says she pays a ‘huge amount of money in taxes already’.
She claims she could save up to £10,000 a month by moving Natal Comfort to South Africa.
‘That is a significant amount of money,’ she said. ‘It’s just a shame because I really wanted to get to a point where I could build the business up here but it’s financially not possible.
‘But it is becoming unaffordable being a self-employed entrepreneur. With this CGT increase, there is no point in us being here with our diverse investment portfolio.
‘Everyone is leaving and it’s a shame. It will impact. I think businesses will either close or people will leave the country to be able to pursue their ventures.’
Becky Lumsden, 49, described the budget as an ‘extinction-level event’ for her business as it imposed a £300,000 increase in staffing costs on her 23 beauty salons.
The mother-of-two from Edinburgh, who employs around 200 people at Pure Spa, which she started in 2002, says she cannot afford this as it stands.
Reacting to the Budget, she said: ‘It’s a complete disaster for our business. It’s going to cost our business about £300,000 to implement changes that the Chancellor announced in her Budget.
‘She talked about invest, invest, invest, but I don’t know how you can invest when you are faced with a cost of £300,000 overnight to try and find.’
She added: ‘It’s an absolute disaster, our industry is being decimated by every policy they seem to come up with.
‘We’re limited in what we can do when it comes to passing on any tax increase. Almost half of our revenue goes to the government, it’s astronomical.
Becky Lumsden (pictured), 49, will incur extra costs of £300,000 a year following the increase in employers’ National Insurance contributions and the minimum wage
‘I feel like going to the government and saying ‘here’s my company run it for me’. It’s very disheartening.
‘We work the hardest in our business and we’re the lowest paid people on our payroll but we’re not classed as workers, apparently.’
Mrs Lumsden says around 60 per cent of her costs are staff so a rise in the National Insurance rate for employers is ‘disastrous’.
‘This is a tax on jobs and it is the worst thing we ever expected them to come up with,’ she said.
‘I don’t feel like they’re fairly sharing the burden. I think it’s disproportionate, the burden will be felt hardest on small and medium businesses.’
She added that she will have to look at ways to operate with less staff and will have less funds to invest in her businesses which will make it more vulnerable.
While Lawrence Barton, who owns three bars in the centre of Birmingham, labelled it a ‘dark day’ for the hospitality industry that will spell the end of many businesses.
The 50-year-old says the rise in employers’ national insurance contribution and minimum wage plus the cut in business rates relief will add £150,000 to his costs.
He is an additional rate taxpayer, earning more than £125,000 a year, and insists this has been the ‘toughest’ year in business since he began almost three decades ago.
‘It’s becoming depressing really,’ he said. ‘I am watching local, regional and national businesses fail on a scale I have never seen. People are feeling quite desperate.’
Mr Barton, who owns The Village Inn, The Loft and The Nightingale in Birmingham, employs around 100 people and the rise staff costs come at a time when they were already trading at a loss.
‘It is going to make life worse as it is. There will be business closures. what we need is relief,’ he added.
‘This type of extra cost will have a detrimental impact on many businesses. It is not a smart strategy to fix something which will lead to more funding holes.
‘By penalising businesses you are suffocating the very businesses which would be far more beneficial in the medium term.’
Sean Finnegan, 49, says the rise in employers’ National Insurance Contributions will cost his business an extra £1,500 a month.
He employs 10 people at the Fold Bistro in Stockport, Greater Manchester, and won’t be able to invest in the restaurant or recruit for more roles following the tax hike.
‘It’s a substantial monthly increase,’ he said. ‘It’s going to affect the sector overall as costs continue to spiral.
Lawrence Barton (pictured) owns three bars in the centre of Birmingham and the rise in employers’ National Insurance Contributions and the minimum wage will cost his business £106,000 a year
Sean Finnegan, 49, says the rise in employers’ National Insurance Contributions will cost his business an extra £1,500 a month
‘The sins of a few are being paid by the blood sweat and tears of the many.
‘It just shows the nature of the government here and they just won’t stand up to the real issues and expect the private sector to bear the biggest brunt.’
The fine-dining restaurant opened in January 2023 and executive chef Ryan Stafford appeared on the final of the BBC’s Great British Menu last year.
Mr Finnegan believes the government is unfairly punishing small businesses.
‘For them to have minimum wage go up over the cost of inflation in back to back financial years, it is basically asking small businesses to pay the cost of government ineptitude,’ he said.
‘It shows a total fear of big business and being unable to stand up to them.’
He added: ‘The UK food scene has taken centre stage over the last 10 years and that work is going to be undone by a succession of ill-advised policies and they’re not listening to the hospitality sector.’
Simon Delaney, who has owned The Firbank Pub and Kitchen, in Wythenshawe, Manchester, for 30 years, said the rise in employers’ NICs and minimum wage hike will cost his business an extra £2,000 a month.
The 59-year-old told MailOnline: ‘It’s definitely not a Budget for pubs or small businesses like mine.
‘The National Living Wage going up, I’m not sure where that money is going to come from.
‘Employer national insurance coming up, again where does that money come from? We are already struggling to break even.’
Karen MacDonald is considering closing her organic skincare store and moving it online following the cut in business rates relief.
Karen MacDonald (pictured) is considering closing her organic skincare store and moving it online following the cut in business rates relief
The 37-year-old from north London started Blomma Beauty in 2018, and was proud when she opened her store in 2021 in the trendy Coal Drops Yard regeneration area of King’s Cross.
Under the Conservatives she received a heavy 75 per cent discount on £9,000 business rates, but will now have to pay an extra £3,150 as the rate relief is slashed to 40 per cent.
When this is added to the higher National Insurance costs she faces for her four staff, there may be little option but to close the store.
Ms MacDonald-Agland, who pays herself just £7 per hour, said she would have to make redundancies if she moves her business online.
Even before yesterday’s Budget, the constantly rising costs for small businesses had already left her disheartened and contemplating closing Blomma Beauty’s physical store.
She added: ‘You hope all the hard work will pay off at the end of the year with increased profits, but this rise would mean it would be wiped out. What we earned last year would remain nothing if costs went up – it just wouldn’t be worth it.
‘It feels like we’re up against it. I feel like there are fewer incentives to contribute something different on the high streets.
‘It has just been this constant slow death, and you want to do something that is exciting.
‘You feel like you’re making progress, but then you get these huge changes that take chunks of money away from you, and you think, ‘Why do I bother?’ ‘
The businesswoman described the change as a ‘blow’ which will only allow bigger companies to thrive.
‘This is why the high street is dying,’ she said. ‘I feel responsible for my team and the customers, but it feels like we’re just scrimping and saving and not getting any benefits.
‘I get that we’re in tough times, but it feels like it is not in the favour of small businesses.’
Rachel Reeves and her senior Treasury ministers have been forced to go on the offensive for a second day following the Budget amid market jitters and anger among voters.
Wednesday’s decision to up taxes to raise £40billion towards increased state spending of almost £70 billion per year, with the rest covered by borrowing, spooked investors.
The scale of extra borrowing – around £32 billion a year on average – saw yields on government bonds increase as the market responded to the Chancellor’s plans.
Ms Reeves has played down the impact, saying that ‘markets will move on any given day’ and sought to offer reassurance of her commitment to ‘economic and fiscal stability’.
Markets remained spooked by the ‘maxi-Budget’ today, with the yield on 10-year gilts spiking in early trading, though still below yesterday’s high. While sterling recovered slightly in early trading against the dollar it remains below its pre-Budget position.
Her deputy today was forced to distance the situation from that which followed the 2022 mini-Budget, which sent the markets into a headspin and ended Liz Truss’s premiership after 49 days.
Chief Secretary to the Treasury Darren Jones told Sky News that ‘markets always respond to budgets in the normal way’, adding: ‘I think we’ve all got PTSD from Liz Truss.