Smaller businesses less optimistic about growth prospects as government looks to hike taxes and red tape in autumn statement

• Nearly twice as many businesses with more than 500 employees think sales volumes will rise than businesses with under 250 staff.
  
• Smaller businesses more likely to think minimum wage increases will have a negative impact.

Smaller businesses are less likely than their larger counterparts to anticipate growth in the volume of products and services they sell over the next 12 months. They are also less confident about passing on increases in costs to customers, according to research by Price Bailey, the Top 30 firm of accountants.

Price Bailey surveyed 750 Finance Directors who work for business with a turnover of £10m-100m, asking them about projected sales volumes and the prices of the goods and services they provide. The full report can be found here.

The results revealed that most UK finance directors (67%) expect their business to sell more services and products over the next 12 months, with 63% anticipating an increase in prices. Businesses with over 500 employees are the most optimistic. The overwhelming majority (96%) expect to increase sales volumes while 95% forecast higher prices.

Optimism begins to dip for businesses with 500 employees or fewer, and businesses in the smallest category (between 10 and 249 employees) are the least optimistic of all. Just over half (57%) of finance directors of businesses with between 10 and 249 employees expect an increased volume of services and products sold over the next 12 months, with 52% forecasting an increase in prices.

In the year ahead, do you expect the volume of products or services sold to increase or decrease? (Company size split)

According to Price Bailey, concerns about forthcoming legislation such as the Employment Rights Bill and the prospect of tax and minimum wage hikes in the forthcoming Autumn Statement are likely to be weighing heavily on small businesses.

Chand Chudasama, Partner in the Strategic Corporate Finance Team at Price Bailey, says:

“Small businesses are the backbone of the UK economy yet they are disproportionately affected by increases in the cost of doing business, whether that is tax or red tape. Concerns that tax rises in the Autumn Statement could fall heavily on small businesses are sapping confidence.”

“In light of the challenges they face, the Government should consider how it can provide targeted financial support to smaller businesses. The UK already has several successful schemes that help to channel investment into SMEs, including the VCT, EIS and SEIS schemes. It should consider how it can further promote these schemes to encourage interest from potential investors who may not have used them before. It should also explore whether further incentives are needed to unlock capital investment into smaller businesses.”

He adds: “As well as providing financial support, the Government should reflect on how it can create the right environment for all businesses to thrive. That involves minimising their administrative and regulatory burden and ensuring that they can access robust digital and physical infrastructure.”

Impact of National Minimum Wage changes

Another notable finding of the research is that the UK’s largest businesses are far more likely than their smaller peers to anticipate a positive impact from changes to the National Minimum Wage (NMW). In April 2024, the NMW increased to £11.44 per hour and further increases are expected as part of the Government’s New Deal for Working People.

Overall, 91% of finance directors for businesses with over 500 employees think that changes to the NMW will be beneficial, while just 5% see them as negative.

In contrast, just over half (53%) of finance directors for businesses with between 250 and 500 employees believe that changes to the NMW are a benefit. Nearly a quarter (23%) think they will have a negative impact.

The smallest businesses, with 10 to 249 employees, are most likely to view changes to the NMW as a disadvantage. For businesses of this size, 42% of finance directors maintain that changes to the NMW will have a negative impact while only 38% see them as a benefit. This is likely because they have proportionately more employees earning the NMW than larger businesses so changes will drive up their wages bill.

How much do you expect changes to the National Minimum Wage to affect your company finances, either positively or negatively? (Company size split)

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