Chancellor Rachel Reeves delivered her first Spring Statement today, outlining a series of long-term economic reforms focused on infrastructure, defence, and digital transformation. However, with the Office for Budget Responsibility (OBR) revising down the UK’s 2025 growth forecast from 2% to just 1%, many small and medium-sized enterprises (SMEs) were left questioning where they stand.
The Chancellor described the global environment as “more uncertain than ever,” citing increased geopolitical risk and rising borrowing costs. While Reeves avoided introducing new taxes, and committed to cutting regulatory compliance costs by 25%, business leaders were left underwhelmed by the lack of direct support for SMEs in the near term.
Muted confidence in the SME community
Reflecting on the Spring Statement’s implications for UK small businesses, Jo Morris, Head of Insight at Novuna Business Finance, said the tone of the Chancellor’s message could dampen SME sentiment at a critical time.
“The strong messages on ‘the world has changed’ in today’s Spring Statement represent a misreading of the room as far as UK small business sentiment goes. While there wasn’t much in the budget specifically for small businesses and the Chancellor avoided tax rises, our research conducted among small businesses in the last two days reveals there is one thing small businesses dislike more than tax rises – and that is bleak economic forecasts.”
According to Novuna’s polling, 37% of small business owners were most concerned about hearing negative news about UK economic growth — more than those worried about potential tax hikes (28%).
“This is partly because the prospect of rising inflation is the top concern of small business owners for the months ahead (37%), and many were hoping for reassurance on the UK’s economic outlook,” Morris added. “Confidence creates confidence — and the way small businesses read signals on the economy at large can be the difference between working on growth initiatives or taking a defensive approach to consolidate their position.”
The survey also revealed a potential hit to employment, with 30% of SMEs saying they would put off hiring if negatively impacted by the Statement, and 29% considering reducing their workforce to manage costs.
“As counter-intuitive as it may sound,” Morris said, “modest tax increases in the context of a managed and progressive economic outlook may have done more to boost small business confidence than delaying tax hikes but setting the scene with tough news on the economy that might scare small businesses today.”
Industry leaders voice disappointment
Ed Rimmer, Chief Executive Officer at Time Finance, expressed similar concern over the lack of targeted support for SMEs outside a few key sectors.
“Aside from businesses working in defence, advanced manufacturing or construction, there was nothing in today’s Spring Statement for SMEs, which jars somewhat with the Chancellor’s fiscal rule to drive growth,” Rimmer said. “The Chancellor speaks of ‘putting working people first’, but this means bolstering businesses to create more employment. When most SMEs are grappling with increases to NI and the resulting cashflow challenges, many are putting recruitment on hold.”
Rimmer pointed to a troubling trend in business formation as a warning sign: “For the first time since 2012, the number of newly incorporated companies shrank in the final quarter of 2024, and until we see measures that encourage entrepreneurial investment, there’s a risk this trend will continue.”
While Reeves stressed that “there are no shortcuts to economic growth,” Rimmer argued that immediate issues like rising costs and delayed invoice payments are being overlooked:
“Businesses are still dealing with day-to-day cashflow challenges, and increases to National Insurance and Minimum Wage are compounding the issue. There is a deepening problem with invoice late payment, which if addressed through legislative changes could help counterbalance rising overheads. The Government has gone quiet on invoice late payment, and it’s disappointing to hear nothing from the Chancellor today on SMEs and the challenges they face.”
Commenting on the impact of the Spring Statement on SME confidence and future investment plans, Theo Chatha, CFO at Bibby Financial Services, said:
“The Chancellor’s Spring Statement will be a huge disappointment to the UK’s small and medium sized enterprises. We know 87% of SME business leaders are eager to invest and nearly half were deferring major investment decisions until after today’s Statement.
“Will SMEs feel more confident after today’s announcements? Likely not, and we could see a worrying continuation of this “wait and see” approach as businesses further delay decisions on areas of investment such as machinery, technology and recruitment – resulting in an economic lag for the UK.
“Off the back of an unpopular Autumn Budget and with increased employer National Insurance contributions and business rates set to rise, today’s statement was a missed opportunity to support the UK’s SMEs.”
Selective sector support
The Statement did include promising announcements for certain industries. £4.5bn has been allocated over five years to support strategic manufacturing sectors, including £2bn for the automotive industry and nearly £1bn for aerospace. Additionally, the Ministry of Defence will receive an extra £2.2bn in the next financial year, with 10% of its equipment budget set aside for innovation in emerging technologies — opening the door for SMEs involved in AI, drones, and defence manufacturing.
Infrastructure projects like a proposed third runway at Heathrow also remain part of the government’s growth plan, with the OBR estimating a £15.1bn GDP boost by 2030 from such reforms.
Regulation reforms and the digital state
A notable feature of the Chancellor’s long-term vision is the government’s pledge to make the state “agile and productive,” with digital transformation at its core. The Regulation Action Plan commits to cutting administrative burdens by 25% and creating a more streamlined regulatory environment. By 2030, one in ten civil servants is expected to be a digital professional.
While potentially transformative, these structural changes are unlikely to provide the short-term relief SMEs say they need.
Long-term vision, short-term gaps
Reeves’s Spring Statement signals ambition, but the immediate needs of small businesses appear to have been sidelined. As inflation, wage increases, and weak growth forecasts loom, SME confidence may continue to falter unless more is done to address their day-to-day realities.
The government’s tone may have unintended consequences. As Jo Morris noted: “Confidence creates confidence” — and right now, small businesses need to see a government that believes in their future.
