White Paper – Autumn Budget 2025
A Small Business Agenda for Growth and Resilience Your Business Community
Introduction
Small businesses are the backbone of the UK economy. They provide jobs, innovation, and vital local services, yet they are often overlooked in economic policy. Ahead of the 2025 Budget, Your Business Community sets out an agenda to address the systemic challenges facing small and micro businesses.
This White Paper focuses on seven critical areas: late payment, energy costs, pensions for the self-employed, public procurement, business rates reform, artificial intelligence, and employment policies. Each of these issues is interconnected, with a direct impact on resilience, investment, and the ability of small businesses to thrive.
Without urgent action, the pressures on small businesses risk widespread closures, lost jobs, and reduced economic growth. With the right reforms, however, this sector can drive productivity, create employment, and strengthen local economies across the UK.
1. Late Payment
Late payments remain one of the most damaging issues for small and micro businesses, with billions of pounds locked up in unpaid invoices at any given time. Many large businesses use their market power to impose payment terms of 60–90 days or more, far beyond what SMEs can sustain.
Policy recommendations:
- Strengthen the Late Payment of Commercial Debts Act with stricter penalties for non-compliance.
- Introduce mandatory 30-day payment terms for transactions involving SMEs.
- Establish automatic penalties for late payment, removing the burden of enforcement from small suppliers.
- Expand the powers of the Small Business Commissioner to investigate and penalise habitual late payers.
- Link public procurement eligibility to adherence with the Prompt Payment Code.
- Introduce tax incentives for businesses that consistently pay early or on time.
2. 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:
- Develop a balanced energy strategy supporting domestic supply (including renewables, North Sea drilling, and fracking) alongside long-term investment in green energy.
- Ensure SMEs have access to affordable fixed-price contracts.
- Introduce targeted relief for microbusinesses and energy-intensive sectors.
- Remove business rates penalties for investment in energy efficiency upgrades.
3. Pensions for the Self-Employed
Automatic enrolment has significantly boosted pension participation among employees, but the self-employed remain excluded. Participation has stagnated at just 17%, creating a looming pension crisis.
Policy recommendations:
- Introduce flexible auto-enrolment for the self-employed, linked to self-assessment tax returns.
- Provide enhanced tax relief or matching contributions to encourage saving.
- Launch targeted awareness campaigns and technology-driven solutions such as pension apps.
- Allow self-employed contractors in the gig economy to access workplace pension schemes.
4. Public Procurement
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.
5. Business Rates Reform
The business rates system is outdated, unfair, and a barrier to investment. Reliefs are complex, inconsistently applied, and due to expire next spring – a cliff edge that could trigger mass closures. Rates are based on rental value, which penalises high street businesses compared with online retailers, and thresholds have not been updated since 2017.
Key challenges:
- Disproportionate burden on high-value locations and low-margin businesses.
- Overly complex reliefs and exemptions with inconsistent administration.
- Appeals that are slow, complex, and costly.
- Penalties on investment in property improvements and energy efficiency.
- Lack of transparency in billing and available reliefs.
- Excessive costs relative to other overheads, with one of the world’s highest property tax burdens.
- Unpredictability due to frequent government interventions.
- Transitional Relief creating unfair winners and losers.
Policy recommendations:
- Replace rateable value with a system reflecting turnover and profitability.
- Simplify and standardise reliefs across local authorities.
- Remove penalties for refurbishment and green investment.
- Improve transparency in billing and appeals.
- Provide predictability through long-term stable reform.
6. Artificial Intelligence (AI)
AI offers transformative opportunities for productivity, but many small businesses lack access, awareness, or skills to adopt these technologies. Without intervention, there is a risk that only large corporations benefit, entrenching inequality.
Policy recommendations:
- Establish government-backed AI training and advisory hubs for SMEs.
- Provide tax relief on SME investment in AI and digitalisation.
- Ensure fair competition by monitoring market dominance by large tech firms.
- Promote ethical adoption and workforce upskilling in small firms.
7. Employment Policies
Small businesses face acute challenges in recruitment, retention, and compliance with complex regulations. Labour shortages, rising costs, and inflexible rules undermine their ability to grow.
Policy recommendations:
- Review and simplify employment law to reflect modern work practices.
- Retain flexibility in contracts to support seasonal and project-based work.
- Expand support for apprenticeships and training opportunities in small businesses.
- Ensure employment policies explicitly recognise self-employed and microbusiness owners as vital contributors to the economy.
Conclusion
Small businesses are resilient and innovative, but the current policy environment leaves them vulnerable. Unless late payment, energy costs, pension provision, procurement barriers, and business rates are addressed – alongside forward-looking reforms on AI and employment – the UK risks undermining its most vital economic sector.
The 2025 Budget presents an opportunity to reset the agenda. With meaningful reform, the UK can unlock small business potential, drive growth, and ensure a fairer, stronger economy for all.