The recent UK Autumn Budget, announced on 30 October, introduces a series of financial measures expected to heavily impact small and medium-sized enterprises (SMEs).
Among the most significant changes is the increase in employer National Insurance contributions from 13.8% to 15% and a 6.7% rise in the minimum wage for over-21s, now reaching £12.21 per hour. These adjustments, according to Novuna Business Cash Flow, a financial solutions provider for SMEs, will place substantial significant pressures on small businesses that are already operating within tight margins.
Employer National Insurance Rate Hike Impacts SME Stability
The increase in employer National Insurance contributions is a departure from the 13.8% rate that has remained largely unchanged since 2011, with the exception of a brief period in 2022 when it reached 15.05%. This prior increase, according to recent British Chamber of Commerce data, led to immediate financial strain on businesses, with 81% of surveyed SMEs reporting adverse effects.
The most common responses to the increased costs included hiring freezes, wage holds, price hikes, and cuts to capital investment. Now, with the rate returning to 15%, SMEs may face similar challenges in their efforts to remain competitive and solvent.
As financial demands on SMEs increase, alternative financing tools such as invoice finance could offer essential support to SMEs. Despite its benefits, invoice financing is not widely utilised among UK SMEs; only 34,000 of the country’s 5.6 million SMEs currently use it, as reported by Novuna Business Cash Flow. This relatively low adoption rate reflects a gap in awareness and adoption, leaving many businesses without access to immediate cash flow solutions to counter rising operational expenses.
Beyond invoice financing, options like payroll finance and credit protection offer further stability, allowing SMEs to safeguard revenue, manage cash flow, and continue growing even in challenging financial conditions. Increased awareness and understanding of these options could help more SMEs to explore flexible financial solutions.
