The unveiling of the Autumn Budget last month was met with a mix of reservation and nervousness by some small business owners. Chancellor Rachel Reeves faced the daunting task of addressing a £40 billion fiscal shortfall while aiming to fund public services and articulate a vision for the new government. Ultimately, it was decided that UK businesses should shoulder the burden. It has been estimated that around half of the tax increases in the Budget will be paid by employers.
Leading up to the announcement, our research at Novuna Business Finance revealed that an overwhelming 86% of small business owners were fearful about potential Budget measures that could negatively impact their growth prospects and financial stability. Now, with the details in hand and the dust beginning to settle, it's a good moment to closely examine these concerns, what actually transpired, and the implications for small businesses.
Our nationally representative survey of 1,046 business leaders, conducted the week before the Government's Budget announcement, highlighted significant worries. National insurance rises were among the top of the list, with around half of business owners believing that any change here would negatively impact their growth outlook and finances. This was particularly the case among small businesses in manufacturing, transport and distribution, and construction-key sectors for Novuna Business Finance.
This worry became a reality with the announcement to increase Employer NICs from 13.8% to 15%, starting in April 2025. Lowering the threshold at which employers start paying NICs from £9,100 to £5,000 per year means that even smaller payrolls will be affected. This jump in NICs is expected to generate an additional £25 billion a year-a hike that even the Chancellor described as "difficult." While the increase in the Employment Allowance from £5,000 to £10,500 offers some relief, it's a nuanced balance. The removal of the £100,000 threshold could benefit larger small businesses, but for many, the higher NICs rate may still result in increased operational costs.
Our survey also found that around a quarter of small businesses were concerned about raising the minimum pay rates for low earners. Sectors like hospitality and manufacturing were among the wariest of the financial implications, with 42% expressing concern. The Government's announcements confirmed these fears: the minimum wage for over-21s will rise from £11.44 to £12.21 from April 2025. Additionally, plans to upgrade workers' rights will have further financial implications for businesses.
Some anticipated challenges did not come to pass. According to our research, around half of the small businesses were concerned about potential rises in income tax and VAT. In both cases, the Chancellor, pledging to be both "pro-business" and "pro-worker," confirmed that these taxes would not increase. There was also good news for some in the introduction of permanently lower business rates for retail, hospitality, and leisure businesses from 2026-27. These sectors will receive a 40% relief on business rates, up to a cap of £110,000.
Returning to Novuna's research, it's important to frame the concerns of small businesses within the broader economic context. Following the General Election, there was a meaningful rise in the percentage of small businesses that predicted growth- up from 30% to 35%. This marked a two-year high in confidence.
Moving into Q4 2024, the percentage of UK small business predicting growth for the final three-months of 2024 remains at the two-year high of last quarter (35%) - with significant upturns in growth forecasts across the North, the Midlands and among younger businesses.
The quarterly tracking research from Novuna, now in its tenth year, goes beyond an attitudinal snapshot of business confidence and instead tracks the percentage of business owners that forecast actual business growth each quarter. The last quarterly cycle of Novuna research, conducted immediately after July's General Election, revealed a two-year high for the percentage of enterprises that predicted growth (35%). The new Q4 figures - 35% again - suggest this summer bounce-back was not a flash in the plan but could be the start of a new, sustainable, period of growth outlook for UK small businesses.
With the UK economy's stagnation and recession moving towards a period of moderate growth, the Novuna Business Finance study indicates that, since the General Election, the Quarter-on-Quarter upturns in small business growth forecasts are happening in the North and the Midlands, rather than the South East or South West. In the North East, small business growth forecasts have jumped from 19% to 36% since the eve of the General Election. Novuna's research noted similar rises in the North West (up from 23% to 34%), the East Midlands (27% to 37%) and West Midlands (up from 29% to 40%).
Conversely, whilst growth outlook is usually disproportionately strong in Central London (57%), small business growth outlook has become subdued in the South East and South West, with no meaningful seasonal rises for Q4 (35% and 23% respectively).
Q4 2024 Q3 2024 Q2 2024 This time last year
West Midlands (Oct - Dec) 40% (July- Sep) 32% (Apr - Jun ) 29% (Q4 2023) 27%
East Midlands 37% 32% 24% 16%
North East 36% 31% 19% 30%
North West 34% 26% 23% 30%
In addition to evidence of resurgent small business confidence in the North and Midlands, younger businesses (those trading for less than five years) have seen growth forecasts improve over four consecutive quarters during 2024. In contrast, among older businesses (those trading for more than 20 years), growth outlook has fallen this year. The smaller size and digital agility of younger businesses has, perhaps, made them more able to adapt to change this year.
% Predicting growth Q1 24 Q2 24 Q3 24 Q4 24
Trading for less than five years 40% 46% 48% 51%
Trading for more than 20 years 30% 27% 36% 24%
The picture by industry sector on growth outlook has shown signs of volatility and variance over the course of 2024. That said, a 12-month view, comparing to the current position to Q4 2023, reveals that more small businesses now predict growth in the manufacturing, construction, retail, media, education, real estate and agricultural sectors. Since the General Election of early July, a greater percentage of business owners today predict growth in seven industry sectors: construction, retail, IT, leisure, media, agriculture and real estate.
So looking ahead to 2025, there are clear signs of positives to build on. For the last two consecutive quarters, 35% of small business owners have told us they forecast growth, which represents a marked upturn from 30% before July - and the years between Covid and the cost-of-living crisis, which was a period stagnation in terms of small business growth forecasts.
As the Government pledges to create equity of opportunity more broadly across the UK, it is noteworthy from our data that small business growth is on the rise across the Midlands and the North. UK small businesses go into 2025 in their most buoyant mood for two years - and we at Novuna Business Finance will be supporting mature businesses to help them invest in future growth initiatives and to realise their full potential.
About Novuna Business Finance
Novuna Business Finance provides business finance to SMEs and bigger corporations across the UK. This includes asset finance, stocking, block discounting and sustainable project finance provided through brokers, vendor organisations, manufacturers and direct to the business community. With an asset portfolio of more than £1.8bn, the business is active across multiple sectors from transport and agriculture to construction and manufacturing and was awarded Best Service from an Asset Based Finance Provider at the 2024 Business Moneyfacts Awards.
The business' Sustainable Project Finance team is also supporting the development and construction of sustainable energy and transport projects, which are critical to the decarbonisation of the UK's infrastructure.
Novuna Business Finance is a trading style of Mitsubishi HC Capital UK PLC, part of Mitsubishi HC Capital Inc., one of the world's largest and most diversified financial groups, with over 11trn yen (£57bn) of assets.
