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One In Five SMEs Forced To Cut Staff As Tax Burden Weighs



Rising tax and cost pressures forced more than one in five (21%) SME bosses to lay off staff last year, according to a survey commissioned by Rathbones, one of the UK’s largest wealth and asset management groups.

 

A targeted poll of more than 1,000 SME founders, owners and senior executives reveals a challenging landscape for business leaders, with cost pressures - including business rates and national insurance contributions - weighing heavily on firms and contributing to redundancies. Nearly six in ten (58%) say rising taxation or regulatory burdens now pose one of the biggest threats to their business, second only to overall rising costs, which are cited by 70% of respondents.

 

With more than one in four SME leaders reporting that over 25% of their personal wealth is tied up in their business, escalating operational costs are increasingly spilling over into their personal finances.

 

This pressure is intensified by a sharply rising personal tax burden, they say. Frozen thresholds continue to push more individuals into higher tax bands, while cuts to capital gains and dividend allowances - combined with higher CGT and dividend tax rates - are further squeezing returns. For many SME owners who take profits via dividends, these changes have materially eroded post tax income and are forcing a rethink of longstanding profit extraction strategies.

 

Faye Church, Senior Financial Planning Director at Rathbones, says:

“We consistently hear from business owner clients across the UK that they are determined to grow, hire and contribute to the wider economy. But heightened tax pressures are increasingly stifling those ambitions. Entrepreneurs are being squeezed from both sides — higher taxes at the business level and rising personal tax bills. This double whammy makes it extremely difficult to plan, invest and build for the future."

 “For most entrepreneurs, the line between business and personal finances is incredibly thin. Tax changes at either level can have an immediate impact on household income, retirement planning and long-term investment goals. That’s why it’s essential to consider business planning and personal financial planning together, rather than in isolation - particularly in a tax environment that is becoming more complex and less predictable.”

 

Other key findings include:

  • Flexible capacity is on the rise: 9% have increased their use of freelancers or contractors, and 9% have shifted towards more parttime or flexible roles.

  • More than three in five SME leaders (62%) believe the government does not understand the needs of entrepreneurs.

  • Demand for targeted relief: Over half (51%) say that measures such as business rates relief or adjustments to employer National Insurance contributions would directly support growth and investment.

 

Hospitality SMEs feeling the sharpest squeeze

The tax and cost burden is proving particularly acute in hospitality. More than 35% of hospitality SMEs say they have been forced to make redundancies - significantly above the overall SME average - while 69% say increased taxation or regulatory burden is now one of the biggest threats to their business.

 

This comes as the sector intensifies its calls for further business rates support. In last year’s Budget, the Chancellor reduced pandemic era business rates relief from 75% to 40%, with the measure due to expire entirely this April. While the government has announced support for pubs, no comparable guarantees have been extended to the wider hospitality industry.

 

Faye Church adds:

“Calls from the hospitality sector for targeted relief highlight the increasingly painful pressures facing these businesses. Without action, the mounting tax and cost burden risks stifling the very growth, innovation and local regeneration the UK economy urgently needs - particularly from a sector that employs so many and contributes so much to communities nationwide.”

 

 





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  • Writer: Paul Andrews
    Paul Andrews
  • Dec 6, 2023
  • 3 min read

A real-life invisibility cloak, a London-to-Sydney flight in 3 hours, manufacturing in zero-gravity space, and worm-like robotics for disaster recovery, these are just some of the 50 emerging technologies that could shape our future.


The 50 Emerging Technologies report from Innovate UK – the UK’s innovation agency – brings together the most exciting new technological breakthroughs that could be part of our everyday lives.


All of the technologies, from tiny nano-materials, to quantum computing, and brain-machine interfaces that allow you to control machines with your mind, are in development right now. While only in their infancy, they’re described in the report as having major potential to transform our lives.


The report is designed to inspire innovative businesses to consider how these technologies, or combinations of them, could become the commercial products of the future. The technologies identified underpin the importance of the Government’s 5 key technology areas, and the potential for these to address global challenges and drive UK economic growth in the process.


The technologies reported on are compiled in seven groups, all of which are important to the UK economy:

  1. AI, digital and computing

  2. Advanced materials and manufacturing

  3. Electronics, photonics and quantum

  4. Energy and environmental

  5. Biotechnology

  6. Health and medical

  7. Robotics and space.

Indro Mukerjee, Chief Executive Officer of Innovate UK, said, “Innovate UK works to support economic and productivity growth through supporting innovative businesses. We also work to help catalyse, connect, and stimulate ideas - and that work is at the heart of this Innovate UK 50 Emerging Technologies report. This report and our horizon scanning work are aimed at stimulating discussion and, directly or indirectly, future innovation which leads to skilled jobs and future economic growth.”


Head of Horizon Scanning at Innovate UK and report author, Simone Boekelaar, explains: "As we enter an era of unprecedented technological change, our new report offers a glimpse into a future where the impossible becomes possible. From anti-ageing drugs to sustainable energy solutions, these technologies could change everything, and we are excited to see the impact they will have on society in the years to come."


“Take Brain Machine Interface (BMI) technologies for example. The premise is that if you can connect the brain with a computer or machine, you can translate thoughts into commands that can control external software or hardware, such as a computer or robotic arm. Advanced BMI technologies are being trialled in prosthetics for people with motor or sensory impairments. They could allow people who are paraplegic or quadriplegic to regain limb control. Those missing limbs could have direct control – from brain to device – of their prosthetics."


“Meanwhile with our energy bills at record levels, could room temperature superconductors provide the answer to lower electricity prices? Current superconductor technology requires very high pressures or very cold temperatures to work. Discovery of new superconductors working in normal conditions could allow zero-waste, low-cost electricity production, radically changing the economics of the energy market.”


Read the full report to find out about 50 emerging technologies that will shape our future here.


The 50 Emerging Technologies


AI, digital and computing:

  • AI emotion and expression recognition

  • Artificial general intelligence (AGI)

  • Biologically inspired AI

  • Brain machine interface (BMI) technologies

  • Quantum algorithms

  • DNA data storage

  • New computing models

  • Novel immersive interfaces.

Advanced Materials and Manufacturing:

  • 4D printing

  • Biomimetic materials

  • Nanoparticle manufacturing

  • Metamaterials.

Electronics, Photonics and Quantum Technologies:

  • Alternative and novel semiconductor systems

  • Emerging microscopy techniques

  • Hyperspectral imaging

  • Millimetre wave and terahertz technologies

  • Photon generators

  • Plasmonics

  • Post-quantum cryptography

  • Room temperature superconductors.

Energy and Environmental Technologies:

  • Cross-linked polymer recycling

  • Gridscale wireless energy transmission and charging

  • Hypersonics

  • Novel propulsion or ion-based propulsion

  • Novel hydrogen production and storage technologies

  • Novel negative emissions technologies

  • Nuclear fusion

  • Space-based solar power.

Biotechnology:

  • Artificial cells and artificial life

  • Bacteria and microbe manufacturing

  • Biocatalytic membranes

  • Bioelectronics and electroceuticals

  • Hybrid microbe biotechnology

  • Programmable cells

  • Biofabrication in tissue engineering.

Health and Medical Technology:

  • Adult stem cell generation

  • Fluxomics

  • Anti-ageing drugs

  • Antibiotic replacements

  • Microbiome therapeutics

  • Personalised RNA therapeutics

  • Phased genome assembly tools

  • Sensation detection implants

  • Whole body-on-a-chip device

Robotics and Space Technologies:

  • Fully autonomous vehicles

  • Nanoscale robotics

  • Robotic off-world manufacture

  • Soft robotics

  • Space nuclear power and novel space propulsion systems

  • Very low earth orbit (VLEO) satellites.


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