Small businesses are warning of a ‘perfect storm’ for April as costs rise
Small businesses braced for what they described as an “unprecedented drop in costs” in April, with more than a third warning they could close or scale back operations as higher costs hit.
The Federation of Small Businesses (FSB) has written to Rachel Reeves warning that the growing impact of rising energy bills, business rates, higher employment costs and changes to statutory sick pay is a threat to economic growth.
A study by the FSB found that 35 percent of small firms plan to close or reduce production in the next year due to rising energy costs, rising national living wages and higher corporate income tax rates.
Tina McKenzie, the FSB’s chair of policy and advocacy, said the burden of the new fees would directly affect firms’ ability to invest. “Running a small business is about to get expensive,” he wrote. “If profits are suppressed by government policy, businesses cannot grow.”
The FSB estimates that an employer with nine employees paid the national living wage will see annual labor costs rise by £25,850 between January and April 2026, a jump of 12.9 per cent.
It also calculates that the average 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 raise income, will cost an extra £578 a year on a £50,000 income.
The removal of the lower limit of statutory sick pay is expected to add to the pressure. The FSB estimates the change will cost the nine-employee company around £990 a year.
Jane Wiest, who runs Initially London, a specialist retailer of monogrammed products, said the sales boom had been offset by higher taxes and operating costs.
“We had a strong January, but these taxes started to go down,” he said. “You are trying to figure out how the incoming money will meet the outgoing expenses, it makes it difficult to rent or invest because you are burdened.”
Sarah Curtis, who works at the historic boat center in Ipswich, said rising wages and debt were making hiring difficult.
“There are too many small increases, services, wages, rates, and it all adds up,” he said. “Small businesses are not willing to take on anyone new.”
The FSB says the combined effect of the costs increases the risks of curbing hiring and slowing expansion plans at a time when policymakers want to boost economic growth.
While ministers have defended the necessary measures to improve worker protection and finance public services, business leaders warn that small firms, which often operate in tight spaces and have limited access to affordable capital, are more exposed.
As April approaches, small employers say they face tough choices: take on higher costs, raise prices or go back to work, each with potential consequences for jobs and the local economy.
