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

Following a flood of ministerial resignations, Boris Johnson has announced he is to stand down as prime minister. We ask SMEs what they want from the UK's next leader.

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Written and reviewed by:
Helena Young

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.

Mick Howard is CEO of UK soft drinks manufacturer, Clearly Drinks. Howard tells Startups: “As a manufacturer, we use a substantial amount of energy [and] we have seen a large increase in our bills. We are also experiencing supply chain issues due to the shortage of CO2 in the UK.

“We would like to see the Government provide significant support in this area to help manage our costs and bring our overheads down.”

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.

Sahil Sethi, co-founder of employee management software Maji.io says: “If there is an emergency budget, we know that SMEs would like to see the Employment Allowance increased further from £5K to £10K.

“The beauty of this allowance is that it is only available to employers who have less than a £100K National Insurance bill in the previous year, so it helps the smallest of employers who need the most support.”

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.

Neil Sheth is founder of Writefully, an on-demand copywriting service. Sheth relays the need for government measures that promote growth, such as “grants for fast growth sectors, reduction to business rates, and taxes where companies are demonstrating that they are recruiting and supporting other local businesses.

“We need a strategic view that enables businesses to move forward and not struggle.”

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.

Bev Botha is founder of cupcake shop, The Travelling Cupcake, based in Hampshire. Botha told Startups about the challenges of dealing with higher rent and operational costs, unveiling “we’ve had to make such hard decisions and are now working seven days a week.”

Still, despite the current climate, Botha remains hopeful: “We seem to have taken knock after knock, but [are still] trying to find a way to survive and thrive! Good businesses will fold. We are just praying [we] aren’t one of them.”

Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

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