Your Business Community Autumn Budget 2025 Submission
1. Late Payment
Late payment remains one of the biggest barriers to SME growth and sustainability. Many larger businesses deliberately create obstacles to delay payment well beyond the stated 30-day terms – often adding 60 days or more:
Policy recommendations:
- Strengthen legislation: Amend the Late Payment of Commercial Debts Act 1998 to impose stronger penalties for delays.
- Mandatory terms: Limit SME payment periods to a maximum of 30 days.
- Automatic penalties: Introduce automatic financial sanctions for late payment without requiring suppliers to pursue legal action.
- Small Business Commissioner: Expand powers to investigate, fine, and – where necessary – name repeat offenders.
- Transparency: Require public reporting of payment practices and create a national database for SMEs to report poor practices.
- Government leadership: Ensure all public sector bodies lead by example by meeting strict 30-day terms.
2. Commercial Energy Costs
Commercial energy costs remain volatile and disproportionately affect small businesses, many of which are tied to expensive contracts negotiated during peak pricing. The removal of government support has left thousands of SMEs struggling.
Policy recommendations:
- Balanced energy strategy: Allow fracking and new North Sea exploration alongside a continued expansion of renewables.
- Fair pricing: Ensure small firms can access affordable energy contracts.
- Support for transition: Provide grants or reliefs to help SMEs invest in energy efficiency and low-carbon technologies
3. Pensions for the Self-Employed
Pension participation is high among employees (88% as of 2023, thanks to auto-enrolment) but remains critically low among the self-employed (17%). Without intervention, this disparity will create a major social and fiscal challenge.
Policy recommendations:
- Flexible auto-enrolment: Link pension contributions to tax returns, allowing for variable income.
- Tax and match incentives: Increase tax relief and consider government-matched contributions for the self-employed.
- Access to workplace schemes: Allow self-employed individuals contracting with large firms or platforms to join employer schemes.
- Awareness campaigns: Launch targeted communications to encourage saving.
- Technology-driven solutions: Back fintech pension tools that simplify access and management.
4. Procurement Opportunities
Despite government commitments, SMEs remain locked out of too many public contracts. Processes lack transparency, contracts are bundled at scales only large firms can deliver, and oversight is weak.
Policy recommendations:
- Increase transparency in tender processes, publishing criteria and outcomes.
- Break up large contracts into smaller lots to enable SME participation.
- Mandate measurable SME involvement targets in public procurement.
- Strengthen oversight of local authority procurement to ensure fair practice.
- Establish a formal body to enforce the implementation of the Procurement Act 2023.
- Re-convene the SME Procurement Panel which was scrapped earlier this year.
- Break up the cartels operating in MOD procurement and which cost the public purse billions of pounds a year.
- Establish a panel of independent procurement experts to introduce changes to NHS procurement and open up supply opportunities for suitably qualified British SMEs.
5. Artificial Intelligence (AI) and Technology Adoption
AI adoption is set to reshape business productivity, but without support, SMEs risk being left behind.
Policy recommendations:
- Small Business AI Fund: Provide grants and tax relief for SME investment in AI tools.
- Training programmes: Deliver local, accessible training on AI and digital skills.
- Fair regulation: Ensure AI regulation does not impose disproportionate burdens on small firms.
- Guidance and best practice: Establish an SME-focused AI resource hub.
6. Business Rates Reform
The business rates system is outdated and punishes high street operators while favouring online businesses. Critical Issue: The 40% retail, hospitality, and leisure relief ends in Spring 2026. If this is not extended, the sudden increase in rates will cause mass closures, devastating high streets and local economies.
Policy recommendations:
- Urgent extension: Continue the 40% relief beyond Spring 2026.
- System reform: Develop a modernised, fairer system that reflects today’s economy.
- Level the playing field: Ensure online retailers contribute proportionately.
- Simplify reliefs: Make Small Business Rate Relief easier to access and understand.
- Local flexibility: Allow councils to trial alternative levy models suited to local economies.
7. Employment and Workforce
Recruitment and retention remain critical challenges for small employers, who cannot always match large-company wages and benefits. Employment law compliance is also disproportionately burdensome for microbusinesses.
Policy recommendations:
- Simplify compliance: Create a single portal for small businesses to access guidance.
- Support training: Offer tax credits or vouchers for SME investment in workforce skills.
- Flexibility: Tailor HR and employment law requirements to reflect microbusiness realities.
- Employment status clarity: Provide clear definitions to protect both the self-employed and employers.
8. Employment Law
Policy recommendations:
- Day-One Unfair Dismissal Rights – The proposal to introduce unfair dismissal rights from the first day of employment risks creating a significant barrier to job creation, particularly among small and microbusinesses.
- For small employers, taking on a new member of staff is already a major financial and operational commitment. The current two-year qualifying period provides a necessary period of flexibility, allowing both employer and employee to determine whether the role and working relationship are a good fit. Removing this period would fundamentally change that balance.
- Day-one unfair dismissal rights would make it considerably riskier for small businesses to recruit. Owners without dedicated HR teams would face greater uncertainty and potential legal exposure even in the early stages of employment, when a role or performance may prove unsuitable. The result would likely be a reduction in hiring, increased reliance on short-term or freelance arrangements, and greater caution about offering permanent roles – outcomes directly at odds with the government’s growth and employment ambitions.
- Rather than expanding employment regulation, policy should focus on building employer confidence. Simplifying employment law, improving access to clear advice, and supporting early dispute resolution would do far more to encourage fair treatment and job creation than imposing new risks on those who create jobs in the first place.
- Policy Recommendations: Maintain the current two-year qualifying period for unfair dismissal claims. Instead, invest in accessible guidance and mediation support for small employers to resolve workplace issues fairly and informally.
9. Tax
The Urgent Need to Avoid Additional Tax Burdens on Small Businesses Small businesses across the country are already operating at the very limits of their financial and operationalcapacity. After several years marked by inflationary pressures, elevated operating costs, supply-chain disruptions, skills shortages, and tightening credit conditions, many of these enterprises are struggling simply to keep their doors open. For a significant proportion, cash reserves have been depleted, margins have compressed to unsustainable levels, and resilience has worn thin. In this context, any further increase in taxation in the forthcoming Budget would risk pushing many viable small businesses beyond breaking point. Even modest tax hikes, whether on labour, energy, commercial rates, or corporate obligations would compound an already severe cost burden. For the smallest firms, where every pound counts, the cumulative effect of rising costs has created a situation where even marginal increases can determine whether a business can continue to trade. Small businesses are not only employers; they are the backbone of local economies, supporting communities, providing essential services, and generating economic activity far beyond their own footprint. If additional taxation forces more closures, the consequences will ripple outward: job losses, reduced consumer spending, declining town-centre vitality, and lower long-term tax revenues for the State. The cost of letting these businesses fail would far exceed the short-term fiscal gains of additional tax measures.
Policy recommendations:
- We strongly urge the Government to prioritise stability, cost containment, and pro growth measures in this Budget. A commitment to avoiding additional tax burdens, alongside targeted supports that address rising operating costs will help preserve the viability of thousands of small enterprises. Protecting these businesses is essential not only for economic recovery but for safeguarding the social and economic fabric of communities nationwide.
Conclusion
Small and microbusinesses are essential to the UK’s economy and communities, but they face systemic disadvantages that the 2025 Budget must urgently address. By tackling late payments, energy costs, pensions, procurement, AI, business rates, and employment challenges, the government can unlock growth, safeguard livelihoods, and ensure that entrepreneurship continues to thrive.