What do small business owners want from Boris Johnson’s successor?

Boris Johnson has this morning announced he will be leaving his post as prime minister. The leadership contest to appoint his successor will begin in the summer, with the aim to have a new leader in place by the party conference in October.

The news came as no surprise after a wave of over 50 resignations, including Chancellor Rishi Sunak, were handed in over the last few days.

This political upheaval, coupled with stark ONS figures showing that the country’s inflation rate is currently at 9%; a 40-year high, has left many small businesses wondering what will happen next.

Regardless, small business owners are being increasingly squeezed by rising costs and wages, skills shortages, and declining consumer spending. And the worst looks yet to come.

The British Chambers of Commerce was among those calling for an emergency budget to fix gaps in March’s Spring Statement and help UK small businesses manage the cost of living crisis.

We spoke to four small business owners about what they are hoping to see from the new Conservative leadership team when it is inevitably announced.

Reversal or delay of the National Insurance increase

From 6 April 2022, National Insurance contributions increased by 1.25 percentage points. The new one-year levy was introduced to fund health and social care in the UK post-pandemic.

Employers paying staff £758.01 to £2,083 a month now have to pay up to 15.05% towards employees’ NI contributions for the current tax year, up from a previous rate of 13.8%.

The change has come under criticism from many small business leaders. They say the increase in contributions means less to spend on investment and staff during an already-testing economic downturn.

As a result of the feedback, the chancellor raised the NI threshold (the amount you can earn per year without paying National Insurance) from £9,600 to £12,570.

However, many of the entrepreneurs we spoke to said the changes didn’t go far enough. They want the government to rethink the tax rise and remove the burden from SMEs.

Reductions to gas and energy bills

Sanctions placed on Russian imports by the UK have had a dramatic impact on wholesale prices, putting pressure on energy companies.

So far, support has been limited. In his recent spring budget, the chancellor announced a 12-month cut in the main rates of fuel duty for petrol and diesel of 5 pence per litre.

But this has done little to alleviate a huge leap in operational costs. Instead, managers have been forced to take unorthodox steps to budget for costlier energy bills.

Some of the suggestions put forward by the small business experts we spoke to include:

• A VAT cut on business energy bills from 20% to 5%, for a minimum of one year
• A one-off ‘windfall’ tax to ease household bills and encourage consumer spending
• Extend the government’s Energy Intensive Industries (EII), a compensation scheme for high energy usage firms, to firms in more industries

Further increase of employment allowance

The government increased the maximum Employment Allowance by £1,000 from £4,000 to £5,000. The changes took effect from 6 April 2022.

As a result of the new rules, all eligible businesses, charities and community amateur sports clubs can claim a greater reduction on their National Insurance contributions.

Our commentators reported they felt the increase should have been greater than £1,000.

Return of free COVID-19 tests

SMEs are also calling for the government to reinstate free COVID-19 tests, so companies can ease the strain on productivity caused by labour shortages.

Persistent high absences amongst workforces have been in the headlines for a number of months.

Airline passengers across the country have complained of two hour security queues. Haulage, farming, and hospitality sectors have also been badly affected.

Critics say the situation has worsened since the end of free COVID-19 tests on 1 April 2022, as staff members who are asymptomatic spread the virus around workplaces.

The onus has consequently been placed on small businesses to purchase expensive private testing kits. Combined with the cost of living crisis, many cannot afford to do so.

The return of free testing would be a simple way to ease the burden on SMEs.

Some of the entrepreneurs we heard from also suggested restarting the Coronavirus Statutory Sick Pay Rebate Scheme as a way to relieve stresses caused by staff absences.

Grants to encourage growth and investment

Many of the policies mentioned by our small business owners were focused on getting through the next few months.

But one also flagged the importance of fostering innovation to ensure businesses – and their local economies – are not just surviving, but also growing.

Conclusion

For months we’ve heard declarations about the important role SMEs will play in the UK’s recovery from COVID-19.

But despite repeated calls for help, the government has kept its finger in the dike with a thin Spring Budget that offered little in the way of support.

If recent government trends suggest anything, the chancellor’s firm denial of an emergency budget means the indicators are on and signalling for a hasty U-turn.

The need for such a pivot is paramount. Surging inflation rates continue to pummel small businesses, impacting supply chain costs and exposing them to other cost pressures such as rising energy bills.

It is time for leaders to show they are committed to helping the UK’s small business community. Actionable, impactful measures need to be introduced, and soon, to sustain SMEs on the difficult road ahead.