Summary 

Overall, this Budget goes some way towards reassuring SMEs that their needs are being heard. There are welcome measures around business rates, fuel duty, reducing red tape and support for new entrepreneurs. However, the reality is that businesses are still dealing with rising wages, high operating costs and an uncertain economic outlook.  

The previous Chancellor wasn’t able to convince SMEs that she was really on their side, leaving many feeling overlooked at a time when they needed support to invest and grow. While the Budget offers some positive steps, access to flexible finance remains critical for SMEs.   

For many SMEs, Labour has already burnt through a lot of goodwill. Confidence will not return overnight, and business owners will be cautious about whether this is a lasting change in direction or just a temporary reprieve.  

Regardless of government policy, at Reward we are working with ambitious SMEs that are determined to create opportunities and invest in growth. We’re here to provide both flexible and long-term funding to turn that ambition into action. 

Increased bank taxes 

Temporarily doubling the banking surcharge is a much smaller burden than many were expecting for banks. It’s not surprising that The Chancellor is keen to keep them on side as a less attractive environment for investment risks undermining the UK’s ability to attract capital and ultimately boost our economic growth.  

For SMEs, there is also a risk that higher costs and greater pressure on banks could translate into a more cautious approach to lending, with tighter criteria and higher borrowing costs making it harder for viable businesses to access the finance they need. 

Any business owner will tell you that we’re in a challenging economic climate, so access to funding is critical. At Reward, we understand that no two businesses are the same. Our flexible approach allows us to look beyond the obvious, understand complex situations and structure long-term or short-term funding around the needs and ambitions of strong businesses. 

Fuel duty freeze 

Once again, we’re seeing fuel duty frozen, offering some welcome relief for SMEs operating fleets, delivering goods or travelling between customer sites. For those in retail and hospitality, the duty freeze means their suppliers’ costs aren’t going up, meaning less pressure to increase their prices.  

Living wage rise, minimum wage slowdown  

The increase in the National Living Wage will be welcome news for workers whilst for SMEs it presents another challenge in an already difficult climate. With wages rising alongside energy costs, taxes and other overheads, businesses are being forced to make difficult decisions about pricing, recruitment and investment in the future. For those operating on tight margins, every additional cost matters. 

Offering a little breathing space, the Chancellor is slowing down aligning the youth minimum wage with the adult wage. But with scrapping youth minimum wage being a Labour manifesto pledge, the direction of travel is clear, so businesses should prepare for this. 

Business rates thresholds raised 

The decision to raise the business rates threshold from £12,000 to £18,000 will be welcome news for high street businesses who have been operating in tough conditions for a while. Making online giants like Amazon and Temu responsible for collecting the VAT owed by the traders using their platforms should also help tackle overseas sellers using shell companies to avoid paying tax, which undermines UK retailers. Alongside online marketplaces, this step will also be paid for by a gambling machine tax and removing business rate relief from vape shops and adult gaming businesses. 

While a great step in the right direction, SMEs need support to go further. A thriving high street depends on businesses having the confidence and financial headroom to invest, adapt and compete. Reducing costs is a positive start, giving viable businesses the means to grow is what will build momentum. 

Entrepreneur support 

In his speech, the Chancellor talked up Britain’s entrepreneurs as important drivers of our economy. This is nothing new to SME owners who know how hard they work in this tough climate. However, the decision to triple the trading allowance from £1,000 to £3,000 will offer incentive for those looking to start a new business, while the Young Entrepreneurs’ Allowance to cover a year of living costs for young founders should lead to an uptick in new ventures. 

Meanwhile, the introduction of founders’ relief, offering a 10% Capital Gains Tax rate on lifetime gains of up to £10 million for qualifying founders, will be good news for those building successful businesses. These measures send a positive signal about the importance of entrepreneurs, but the real test will be whether they translate into lasting support for businesses looking to establish themselves, invest and grow. 

Support for household energy bills 

Helping household energy bills will always be a popular move and has the benefit of giving consumers more spending confidence. But high energy costs on businesses remain a concern, particularly for SMEs in manufacturing, hospitality or any other energy-intensive industry. 

Cutting red tape 

The government is also removing £800m worth of red tape and tariffs to give businesses breathing space. Reducing unnecessary red tape can make a meaningful difference to SMEs, where management time and resources are already stretched. Every hour spent navigating avoidable administration is an hour taken away from running the business, developing new opportunities or investing in growth. 

Devolved powers  

Giving regional leaders and mayors greater control over spending could unlock opportunities for SMEs across infrastructure, regeneration and local supply chains. But as we’ve seen with years of talk about ‘levelling up’ but limited action, announcements alone will not drive growth. Investment must translate into projects on the ground, creating a clear pipeline of work that businesses can plan for and deliver. 

The Chancellor also set out a roadmap for fiscal devolution, with regions expected to gain greater control over locally raised business rates over the next decade. Down the line this will lead to local investment, which will be a boost for SMEs in these regions, but will have little impact today. 

Finally, extending powers to local governments to put levies on overnight stays will likely have a negative impact on hospitality and retail. Making trips more expensive risks deterring some visitors and reducing discretionary spending, with knock-on effects for hotels, restaurants, retailers and other local businesses. For SMEs already operating on tight margins, any measure that risks dampening demand will be a concern.