The latest insight from The Global Payroll Association (GPA), reveals that the number of active small businesses in the UK has fallen in the past year as reductions in profitability make it harder to remain profitable and, therefore, operational.
The government’s Autumn Statement in October 2024 introduced increases to the National Living Wage and Employer National Insurance Contributions which have vastly increased staffing costs for businesses of all kinds. A recent survey of UK SME owners by GPA revealed that more than half have real concerns about the impact of the Autumn Budget tax rises which are due to take effect from April, and 89% have had to issue staff redundancies in the months since Rachel Reeves’ statement.
The latest analysis from the GPA reveals that the number of small-to-medium sized businesses (SMEs) operating in the UK has fallen by -1%* in the past year, likely caused by a decline in small business profitability which, between Q3 and Q4 2024 (latest available data) also fell by -1%*.
The largest regional decline in the number of small business profitability has been seen in the South West where profits fell by -6.1% between Q3 and Q4 of last year.
This is followed by the West Midlands (-1.1%), South East (-1%), Scotland (-1%), London (-0.3%), and the North West (-0.3%).
Some regions have, however, managed to buck this national trend by seeing an increase to small business profitability, including growth of +2.9% in the North East, 2.3% in the East Midlands, +2.1% in Yorkshire & Humber, and +1.5% in the East of England.
Melanie Pizzey, CEO and Founder of the Global Payroll Association, says:
“Small businesses in the UK are going through an incredibly difficult period. Employment is down, profits are down, and the number of operational businesses is also down. It doesn’t look good from any angle. The Autumn Budget has had a devastating impact before the tax increases have even taken effect.
Businesses will now be hoping for some kind of relief or support from the government’s upcoming Spring Statement on 26th March, or else brace themselves for a tough couple of years ahead. Labout’s stance is that this painful period will be short-lived and soon pave the way for a much more prosperous economic future for UK businesses and the nation as a whole. Whether or not that comes to fruition remains to be seen.”