SMEs plan pay and recruitment freezes as tax rises drive cost pressures – Premium Credit

Research found 26% planned to limit pay rises, while 19% said they would either not replace staff who leave or stop recruiting. 
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Small and medium sized enterprises (SMEs) are planning pay and recruitment freezes to deal with Government tax rises, including higher employer national insurance contributions (NICs), Premium Credit’s latest Insurance Index has found. 

Over half of SMEs surveyed said they were worried about tax rises, with 13% very concerned and only 13% were not concerned.

Research found 26% planned to limit pay rises, while 19% said they would either not replace staff who leave or stop recruiting. 

Just 7% said they would cut back on insurance cover.

Additionally, the report found 53% predicted a rise in revenue over the next year, compared to 6% expecting a fall. 

Another 15% expected no change, while 24% were unsure.

One in five said late payment of invoices and bills had got worse over the last year, 51% reported no change and 7% said there had been an improvement.

Research also showed that around 15% said it had become more difficult since the cost of living crisis began in 2021. 

SMEs said they were optimistic about revenue because of plans for new products (36%), entering new markets (34%), or because they had already cut costs (34%). 

Another 19% said they had recruited key staff to help with growth.

Among firms expecting a revenue drop, 40% blamed cost of living pressures, 35% pointed to government tax rises and 30% said they expected the UK economy to stagnate. 

More than a quarter said some of their clients had gone bust.

Owen Thomas, chief sales officer at Premium Credit, said: “SMEs are juggling a range of issues, with the increase in Employers’ National Insurance a major cause for concern among many firms which plan to limit pay rises and cut recruitment.

“Issues such as access to credit and late payment of bills remain a concern for firms and are adding to the pressure.

“However, despite this many are still optimistic about revenue growth in the year ahead with plans to expand through new product launches and growth in new markets. 

“Many have also adapted and cut costs already underlining the resilience of the SME sector.”

Marvin Onumonu

Marvin Onumonu is a Reporter for Workplace Journal and The Intermediary

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