Supply chain crisis, Rising Business Costs, Highest Ever Fuel Prices, Minimum Wage increases and a shortage of talent – can tomorrow’s budget deliver support to the UK’s struggling SMEs?

Ahead of tomorrow’s budget, a new report in yesterday’s Financial Times reveals that the UK’s supply chain crisis is likely to continue into 2023 and beyond, according to a broad coalition of business groups, who warned that the UK’s 6 million SMEs would bear the brunt of a triple whammy of ongoing talent shortages, supply chain issues and wholesale price rises, alongside materials costs rising rapidly, freight costs up tenfold compared to pre-pandemic levels and rapidly rising inflation, most notably in the food and drink sectors.

Businesses will also be hit with an increase to their staffing budget, with new Minimum Wage Rises – but with rising costs across the board, what does the UK need from the Chancellor tomorrow?

Minimum wage increases set to rise from 1 April:

National Living Wage for over-23s: From £8.91 to £9.50 an hour
National Minimum Wage for those aged 21-22: From £8.36 to £9.18
National Minimum Wage for 18 to 20-year-olds: From £6.56 to £6.83
National Minimum Wage for under-18s: From £4.62 to £4.81
The Apprentice Rate: From £4.30 to £4.81

“Treasury Wallowing in a £1bn VAT Bonanza from Drivers”

The FairFuel Campaign has called for more support for drivers in tomorrow’s budget, noting that increase in fuel prices means the Chancellor could cut Fuel Duty by 3p per litre and still benefit from extra VAT pouring in. A spokesman called for a fuel duty cut tomorrow:

“Pump prices have increased by 28p in the last 12 months giving an extra 4.66p per litre to the Exchequer. With 40bn litres of petrol and diesel sold each year that means an extra £1.86bn of VAT based on current pump prices. But by extrapolation the gradual increase in pump prices, and because businesses can reclaim VAT costs, we have calculated the extra VAT windfall to the Treasury is closer to £1bn.

“We are hearing that Fuel Duty is to be frozen in the October 27 Budget, for the 11th year in succession. That will be a relief, not a celebration. Drivers being attacked by Clean Air Zones, LTNs, notably in London, the threat of the 2030 fossil fuel ban, the painful level of pump prices and being blamed for the environmental ills of the planet warrants a cut in Fuel Duty.”

How Heavily are UK Drivers Taxed compared to other nations?

 Image source: FairFuelUK Campaign

A spokesman for The FairFuel Campaign continued:

“In the last few days, over 40,000 FairFuelUK supporters have emailed the Chancellor and his Treasury Ministers calling for a significant cut in Fuel Duty. With the shock increase in National Insurance, the loss of £20 Universal Credit, the massive increase in energy prices, oil smashing past $86 and pump prices at their highest ever, any increase in Fuel Duty would be economically irresponsible, needless and a huge betrayal of newly won Tory converts outside of London.”

“The Treasury knows full well that cutting Fuel Duty stimulates the Economy. In 2014 they said: “…. cutting duty will increase GDP in the long-term, business profits, wages, and consumption. And as such, all these positive fiscal stimuli will add to higher tax revenues….” In other words, cutting Fuel Duty is an economic stimulus!”

“Rishi, please don’t be conned by your urban based well paid special advisors, who see their fashionable green propaganda to justify a fuel tax hike, and to subsidise EV sales. Have the leadership mettle and wisdom to help the world’s already highest taxed motorists, give them a break, at least maintain the freeze, but even better use the extra VAT you’ve enjoyed cutting Fuel Duty big.”

What do businesses want to hear tomorrow?

Ahead of tomorrow’s budget we spoke to prominent business leader, Steve Herbert who is Head of Benefits Strategy at Howden Employee Benefits & Wellbeing to gauge his feelings on what the chancellor could offer in addition to the already reported above-average increase in the National Minimum Wage – to support the businesses already hard hit.   Steve said:

“The above inflation increase to minimum wage requirements will be rightly welcomed by employees, and for those on Universal Credit will help offset the loss of the temporary £20 per week uplift which ended earlier this month.  It will also help many low-paid households meet the rapidly increasing cost of domestic fuel and petrol prices.

“But from an employer’s perspective this announcement adds to the business and employment costs at what is likely to be an uncertain period for many businesses post-pandemic.

 “Employers were already braced for a significant increase in employer National Insurance contributions from next April, and those in low-paying industry sectors will now also have to absorb an above inflation increase to salary roll at exactly the same time. 

 “This may hit hard those sectors that have been struggling the most during the pandemic, including agriculture and hospitality.  Many in these sectors have yet to return to  pre-pandemic levels of output, and some will also be working with more limited cash reserves and debt costs as a result of the last 18 months of on-off pandemic restrictions too.  And of course businesses of all sizes are facing sharp increases in other areas, and most notably the cost of fuel.

So it will be interesting to see if these additional business and employment costs are offset by other measures announced by the Chancellor on Wednesday.”