Small businesses warn of April 'perfect storm' as costs surge

"The Federation of Small Businesses (FSB) has written to Rachel Reeves warning that the cumulative impact of rising energy bills, business rates, higher employment costs and changes to statutory sick pay risks undermining economic growth. A survey by the FSB found that 35 per cent of small firms plan either to close or reduce output over the coming year in response to increased energy standing charges, a rise in the national living wage and higher dividend tax rates. Tina McKenzie, the FSB's policy and advocacy chair, said the burden of new costs would directly affect firms' ability to invest. "Running a small business is about to get a lot more expensive," she wrote. "If profits are squeezed by government policy, businesses cannot grow.""

"The FSB estimates that an employer with nine staff paid at the national living wage will see annual employment costs increase by £25,850 between January and April 2026, a 12.9 per cent jump. It also calculates that a typical small shop or restaurant will see business rates rise from £4,790 to £5,590 this year, while changes to dividend tax, a common way for owner-managers to draw income, will cost an additional £578 annually on earnings of £50,000. The removal of the lower earnings limit for statutory sick pay is expected to add further pressure. The FSB estimates the change will cost a nine-employee firm around £990 a year."

"Jane Wiest, who runs Initially London, a retailer specialising in monogrammed products, said improving sales had been overshadowed by higher taxes and operating costs. "We had a strong January, but then these taxes started to hit," she said. "You're trying to work out how the money coming in will cover the expenses going ou"

Small firms confront a concentrated rise in costs from April due to higher energy standing charges, increased business rates, a rise in the national living wage, higher dividend tax rates and changes to statutory sick pay. The FSB reports 35% of small firms plan to close or reduce output over the coming year in response. An employer with nine national living wage staff could see employment costs rise by £25,850 between January and April 2026. Typical small shops and restaurants face notable business rate and dividend-tax increases, while removal of the lower earnings limit for SSP adds roughly £990 annually for a nine-employee firm. Business owners report rising sales being eroded by higher taxes and operating costs, squeezing profits and limiting investment capacity.

Read at Business Matters