Spring Economic Outlook 2025: 'Business Optimism Hangs by a Thread'

Amidst a 3% inflation rate, the Bank of England's base rate remaining steady at 4.5%, and the economy's unexpected contraction in January, the media's portrayal of economic despair is hardly surprising.

This is a pattern that has persisted throughout history: public anxiety is mirrored and amplified by the news, which in turn exacerbates the overall sense of unease. Such an atmosphere fosters a culture of prudence within businesses, which can be detrimental to growth and innovation.

Currently, businesses are seeking a glimmer of hope from the Government. It has been half a decade since businesses faced some of their most formidable challenges, and the journey since 2020 has been arduous, marked by a continuous struggle to regain lost ground.

Those who have endured the trials of Covid-19 and the financial aftermath have also grappled with increasing operational costs and tax obligations. The resilient businesses that have adapted, made astute decisions, and flourished against all odds are in dire need of respite.

Beyond a mere break, these businesses deserve recognition for their tenacity. Additional funding for skill development, enhanced tax benefits for investments, and a more equitable business rates system across all industries are essential measures to alleviate the mounting pressure on our nation's SMEs.

One of the Government's fiscal objectives is to reduce national debt, Wednesday's focus will likely be on spending reductions. Consequently, businesses should not anticipate tax relief.

The rise in payroll expenses and National Insurance contributions pose significant challenges for businesses, influencing their hiring decisions and cash flow. This not only affects employment but also hinders business expansion.

What is required are countermeasures to these issues. The Government could expand its Business Rates relief to SMEs beyond the retail sector.

Introducing more flexibility in tax payment deadlines—or streamlining the process altogether—could alleviate the administrative burden on SMEs, allowing them to concentrate on revenue generation.

While a tax reduction may not be on the horizon, the Government can still facilitate a smoother business operation, which would nurture the entrepreneurial spirit and optimism that our country's SMEs rely on for success.