Showers, not sunshine: businesses underwhelmed by Spring Forecast

In the end, it could only go one way. We had been warned that today’s Spring Statement would be more of an update rather than much-needed reform or spending commitments. Still, some SMEs hoped the Chancellor, Rachel Reeves would have a change of heart on previously-announced tax hikes, like the rise in employer National Insurance (NI).

Those hopes were dashed earlier today, when the news came that the Office for Budget Responsibility (OBR) has halved growth forecasts for 2025 from 2% to 1%. Then, confirmation that the employer NI rise, reduction to business rate relief, and higher National Living Wage (NLW), will all go ahead.

With nothing new to chew on, the reaction to the statement from UK SMEs has largely been one of exasperation. Kevin Fitzgerald, UK MD, Employment Hero, the payroll platform, says that Reeves’ statement “missed the mark”, adding, “the increase in employer NICs alone will cost businesses £900 more annually per employee on a median wage.”

2025 Spring Statement: key updates at-a-glance

Below, we explain the key points that business leaders should know from today’s Spring Statement, with analysis from financial experts and SME leaders.

1. Planned tax rises to go ahead

No Hail Mary on NICs, then. From 6 April 2025, employer NICs will rise from 13.8% to 15% for salaries over £5,000. The threshold for contributions will also drop to £5,000 annually.

There had been hopes for another increase in Employment Allowance, but the Chancellor appears to have said all she is willing to on the change. The new rate will hit payroll bills for small businesses, and there are already warnings it could lead to job cuts this year.

In April, the NLW will also rise to £12.21 per hour for workers aged 21 and over, putting additional pressure on businesses in sectors like retail, hospitality, and care.

Ben Gatenby is owner of 1st Defence Locksmiths, a trades business based in Leeds. Gatenby tells Startups he’s concerned about the impact the rises will have on profits.

“The upcoming tax increases are worrying because they eat into already tight margins”, he reveals. “As a small locksmith business, any extra costs soon add up. It makes it harder to reinvest in better tools, training, and advertising.”

2. Business rates relief set to be slashed

With no announcement to the contrary, it looks like the planned reduction in Business Rates Relief from 75% to 40% (a move announced in the previous October Budget) will go ahead from April 1.

The change is expected to more than double the average pub’s rates bill, causing concern within the hospitality sector. Experts are now pushing for Whitehall to expedite its planned overhaul of the business rates system, which was dealt a significant blow last week.

Andy Fishburn is Managing Director at Virgin StartUp. Fishburn describes the reduction in Business Rates Relief as “a temporary fix with no forward thinking”.

“This is a huge blow and worry for many of the small business owners in our Virgin StartUp Community,” he adds. “The slash in rates relief will have a detrimental effect on businesses that are already struggling and need support now more than ever.”

3. Crackdown on tax avoidance

The government confirmed new measures aimed at increasing tax fraud prosecutions by 20%. It’s estimated that the change will raise approximately £7.5bn in additional revenue.

Tax avoidance is technically legal and helps reduce tax liabilities, while tax evasion refers to breaking the law. However, the Chancellor has pledged to crack down on both.

The plans include investing in more compliance staff for HMRC and leveraging technology to detect tax fraud more effectively. HMRC has previously been criticised for trading in its support team for AI customer agents, resulting in a dismal wait time of 23 minutes.

4. Tax thresholds remain frozen

Despite a viral petition to raise the Personal Tax Allowance, no changes have been made to UK tax bands, which will remain frozen at their current levels until 2028.

It could be worse. There had been rumours that the Chancellor would extend the cap until 2030 in her Spring Statement. Thankfully, though, this threat has not materialised.

5. Consumer spending forecast to fall

As well as the Chancellor’s Spring Statement, the OBR also released its latest economic forecast today. It predicts that real household disposable income is forecast to rise by 1.7% this year. That represents a drop on the 3.9% growth recorded in 2024.

B2C businesses, take note. If consumers have less extra money to spend this year, this means shops, restaurants, and other customer-facing sectors will likely see a fall in sales.

Businesses should adjust their sales forecast now and review pricing strategies. Lowering prices might sound counterintuitive, but it could be necessary to keep customers loyal. In our survey of 531 SME leaders, we found that 16% of thriving businesses attributed their success to strong customer relationships (the highest of any response).

6. Welfare reforms

Ostensibly in a push to get people back to work, the Government also today announced a raft of welfare reforms including stricter Personal Independence Payment (PIP) criteria and reduced Universal Credit support for those with health conditions.

In her announcement, Reeves said the changes will help to address rising unemployment figures. Government statistics reveal that 270,000 employees aged 16-34 are already economically inactive due to long-term sickness and mental conditions.

However, critics argue that reducing support for those on long-term sick leave is unlikely to create a productive and healthy workforce. Forcing individuals with genuine long-term health conditions back into work without adequate support can worsen their conditions, leading to increased absenteeism, decreased productivity, and potential burnout.

Katharine Moxham from Group Risk Development (GRiD), the industry body for the group risk sector, comments: “Cuts impact those who are vulnerable in our society, and workers with health conditions or disabilities need support now more than ever.”

Business leaders say ‘stop the blame game’

Last year’s Autumn Budget was the Chancellor’s first fiscal event. Blasted by critics as the ‘anti-business budget’, Reeves blamed many of the policies it introduced (most of which were confirmed today) on a budget black hole inherited from the previous government.

She’ll need a better line of defence this time around. Gina Miller, Founder of MoneyShe, an investment platform, tells Startups it is “disappointing that the Chancellor has lacked the courage to introduce radical but fairer reforms”, arguing that the Government’s hemming and hawing is causing confidence among business owners to weaken.

“”The Chancellor has stated that growth is her number one mission — yet today offered little evidence of a clear plan or strategy to achieve it,” adds Miller. “You can’t keep blaming the last 14 years; there must be a compelling vision for the future to restore confidence.”

There will be some who are just relieved that the statement didn’t have more trapdoors for employers; a ‘no news is good news’ line of thinking. But that outlook can’t hold for long.

Many businesses have already put major investment decisions on hold, expecting that today would bring economic clarity. Instead, they now face another six months in limbo.