The Impact of Government Business Rises on UK Companies: To NI-finity and Beyond

Introduction

Policies from the UK government play a critical role in shaping our economy and business environment. Changes announced in the Autumn budget, such as taxation, and employment costs, are having significant financial and operational on businesses of all sizes. One such key factor is the increase in National Insurance contributions.

In this article I will explore the impact of these government-imposed costs, the challenges businesses will face, and how companies can navigate these changes effectively.

National Insurance Increases: What it means

National Insurance contributions (NICs) are a major cost any business in the UK with employees has to consider. The government has made adjustments to NICs, impacting both employers and employees.

Key changes being brought in are increases in Employer Contributions, which also have an impact on Employees as they could see less of their standard pay check - causing costs to rise.

Wider Government-Imposed Costs: Affecting Businesses everywhere

While National Insurance has been at the forefront of most people’s minds, there are other government driven financial changes. These includes

1. Business Rates Increasing

   Business rates are charged on commercial properties, but are continuing to go up, putting pressure on anyone with a physical premises. In some cases councils can offer some relief, but as they feel the pennies pinching too, the guidelines for these are getting stricter

2. Minimum Wage

   Minimum wage is going up to £12.21, which is a significant jump for the £11.44 last year, and a far cry from the £8.72 seen only 5 years ago. With this, businesses are forced to up workers pays, and if they don’t want to cause issues in management, it has to be company wide. This is causing issues for many small businesses, especially those with high labour costs.

The Impact on Businesses

Rising costs due to government policies can lead to a range of challenges, including

1. Increased Operating Costs

   Day to day costs are increasing, meaning you either need to raise prices, or find the difference

2. Hiring Challenges

   Due to onboarding and hiring costing more, with a higher risk due to increased costs, some businesses choose to freeze hiring or look at redundancy.
   Potential employees will want to a better pay packet to change jobs with the increased cost of living, and to feel like their skillset is reflected

3. Reduced Competition in the Global Markets

   If UK businesses face higher costs compared to their international competitors, UK companies will be struggling to remain competitive.

4. Cash Flow Strain

   With less in the margins, cash flow will take a huge hit, with SMEs experiencing the biggest impacts, as they may not have the reserves to weather the storm

How we are helping our clients adapt:

This has been a big point of worry for our clients recently, (see here for our case studies) but here are some general ideas to review to maximise your money

1. Optimise Workforce

   Optimising your placement of employees to suit their abilities means that they can get more done in less time than someone who isn’t as suited to that role. You can also review flexible working arrangements and create a structure for sickness cover, to reduce your reliance on hiring anyone else

2. Financial Planning

   Create and review financial forecasts regularly to allow you to budget for cost increases

3. Reviewing Processes

   Look internally at anything that is using time, resource, or money. Ask your teams for any pain points, and look to see if you can maximise your pooled resources.

Conclusion

Government imposed cost rises are creating pressure, especially for small businesses and high street shops. But this stress can be eased by strategic planning, cost management, and operational efficiency.

We CAN help relieve the pressure

Through our consultancy service and support initiatives, we can get through these times together. Contact Us to arrange a free consultation