TAXED TO DESTRUCTION

Business investment crashes to pandemic levels

The UK’s small firms are slamming the brakes on investment as costs soar, confidence collapses (again) and tax bills bite.

Small and micro businesses across Britain say they’re being “taxed out of existence” as investment plunges to its lowest level since the pandemic, according to the British Chambers of Commerce.

Only 17% of firms plan to invest this year, down from 21% just months ago.

Confidence Crashes

How much more inflation, war and taxes can the small and micro business sectors shoulder. The BCC’s latest survey paints a grim picture:

• Confidence slumped sharply in Q2

• Less than one‑third of firms saw sales rise

• Energy costs surged as the Iran conflict choked oil supplies

• Businesses are still reeling from the tax hikes in 2024, especially employer National Insurance

Reeves’ Tax Rise Still Hurting Two Years Later

The BCC says Reeves’ employer NI hike is still hammering small firms, and most firms are now experiencing policy as downside risk rather than opportunity. Government policy is making business harder, not easier.

Small firms say the tax burden is:

• killing investment

• squeezing margins

• stopping hiring

• pushing owners to cut back or shut down

The admin load is another unbearable burden.

Admin Chaos Is Crushing

The BCC warns that the cost and complexity of paperwork is strangling growth.

Small businesses say:

• tax admin is out of control

• compliance takes hours they don’t have

• rules keep changing

• government reforms create more work, not less

Turnover Expectations Fall

Only 44% of businesses expect turnover to rise in the next year, down from 49%. Meanwhile:

• 23% expect sales to fall

• Firms are becoming defensive

• Years of shocks have created a “risk‑aversion cycle”

The BCC says small businesses haven’t lost ambition, they’ve lost confidence.

Retail & Hospitality

They are already battered by inflation and are now the loudest critics of the Chancellor and her tax plans. The BCC found that only a third of hospitality firms expect turnover to rise while a third expect sales to fall.

Customers have “reined in their spending” because of economic instability and that’s having a huge knock-on impact on businesses. These sectors are crucial to the UK’s high streets and they’re being squeezed from every direction.

Years of Shocks, No Relief

The BCC says the collapse in investment isn’t caused by one crisis, but years of compounding pressures:

• inflation

• energy shocks

• geopolitical conflict

• tax rises

• weak demand

• admin overload

Small firms are exhausted and running out of room to manoeuvre.

The Challenge for the New Prime Minister and the new Chancellor

The BCC’s verdict is blunt:

Small businesses need:

• lower employer taxes

• simpler admin

• stable policy

• cheaper energy

• a real growth plan

• support for investment

I would add to that list: a minister, who really has run a small business and understands what’s involved, to fight their corner. Without it, Britain’s small business economy, the bit of the economy the drives jobs, innovation and local prosperity, will stall.

Small and micro businesses are sounding the alarm:

• investment has crashed

• confidence has slumped

• costs are soaring

• tax bills are suffocating firms

• retail and hospitality are in crisis

• risk‑aversion is taking hold

The UK’s small business owners haven’t lost ambition, but they are losing money, customers who have run out of cash, and patience.

If the Government wants growth, it needs to stop taxing small businesses out of existence and start backing the firms that keep Britain running.