The Budget’s Financial Strain on SMEs
As the dust settles, the implications of the October Budget have come into sharp focus. It is now clear that the measures disproportionately target businesses. The UK government’s decision to raise employer National Insurance (NI) contributions from 13.8% to 15% has pushed rates to historic highs. Simultaneously, a 6.7% hike in the minimum wage for over-21s, now set at £12.21 per hour, adds further financial strain.
Data from the British Chamber of Commerce highlights the consequences of past rate increases, with over 80% of surveyed SMEs reporting adverse effects such as reduced hiring, wage freezes, increased prices, and cuts to capital investment. Similar outcomes are expected as businesses adjust to these new realities.
According to a recent borrower survey by SME Capital, 80% of respondents reported that the budget would negatively impact their operations. NI contributions were cited as the most pressing challenge, though some businesses noted that adjustments to allowances might mitigate the impact. Universally, respondents agreed that running a business had become more difficult over the past year.
Resilience and Forward Thinking
Despite the challenges, many SMEs remain optimistic. Forward-looking business leaders are already revising their 2025/26 forecasts to account for the budget’s impact and exploring measures to offset its effects.
This proactive approach underscores the resilience and entrepreneurial spirit of the UK’s SME community. Amid the uncertainty, many recognize the importance of fostering an entrepreneurial culture to drive growth.
Alternative Financing: A Growing Solution
As traditional banks continue to overlook SMEs, alternative lending solutions are emerging as a vital resource. According to Allica Bank, 40% of SMEs plan to raise investment in the next 12 months. Although the road ahead may be turbulent, the strong appetite for growth and innovation within the sector is a promising sign.
By leveraging alternative financing options, which are currently used by less than 1% of SMEs, businesses can secure the capital needed to achieve their growth aspirations.
Final thoughts
Despite mounting economic pressures, the UK’s SMEs remain steadfast in their pursuit of growth. Through strategic planning, innovation, and alternative financing, these businesses continue to embody the resilience and determination that define UK SMEs entrepreneurial spirit.
Now is the right time for all businesses to review their strategies and attendant budgets, ensuring they afford them the best possible means of dealing with the implications of the budget.
About SME Capital
SME Capital was founded to support the growing number of SMEs who face difficulty or frustration in accessing capital through traditional methods. We understand the importance of real and trusted relationships in the SME lending market and have dedicated Regional Directors based across the UK.
By combining traditional lending expertise with the latest in data analytics, we are supporting established UK SMEs with their long-term objectives and business ambitions.
