Autumn budget puts financial strain on SMEs

Novuna Business Cash Flow, provider of financial solutions for small and medium-sized enterprises (SMEs), has reviewed the UK’s latest budget announcement, which introduces significant changes expected to impact businesses across the country. 

As of the 30th October budget, the UK government has raised employer National Insurance contributions from 13.8% to 15%, marking one of the highest rates on record in recent times. Coupled with a 6.7% increase in the minimum wage for over-21s, now set at £12.21 per hour, these shifts pose a formidable financial challenge for SMEs, many of which operate on tight budgets.

1.2% increase on employer national insurance puts financial pressures on SMEs

Historically, the employer National Insurance rate has held at 13.8% since 2011, with only a brief increase to 15.05% between April and November 2022, which had a substantial impact on businesses’ financial stability. 

According to data from the British Chamber of Commerce, this previous rate increase led to 81% of surveyed SMEs reporting negative financial consequences, including a reduction in hiring capacity, wage freezes, increased service prices, and decreased capital investment. With the latest increase, similar cost-cutting measures may once again become a necessary reality for many SMEs striving to stay competitive and financially solvent.

Alternative financial solutions used by less than 1% of SMEs

With the latest budget announcement signalling potentially turbulent times for SMEs due to rising operational costs, several financial tools are available that could help businesses navigate these challenges. Invoice finance, for example, provides immediate cash flow support by unlocking funds from outstanding invoices, yet it remains underutilised by UK businesses. Novuna Business Cash Flow reports that out of 5.6 million SMEs, only 34,000 currently use this facility, highlighting a significant gap in awareness and adoption among SMEs.

In addition to invoice finance, other options like payroll finance and credit protection offer further stability, helping SMEs manage cash flow, safeguard revenue from credit risks, and pursue growth despite financial pressures.

Success story: Leveraging flexible financial solutions

The Stone Company UK, a leader in bespoke work surfaces, exemplifies how financial flexibility and the right partnerships can support resilience. Facing financial strain, The Stone Company partnered with Novuna Business Cash Flow (NBCF) to access tailored invoice finance and credit protection solutions, which stabilised cash flow and enabled the company to grow, even amid economic uncertainty.

Since joining NBCF, The Stone Company UK has seen its monthly invoicing increase from £400,000 to an impressive £600,000–£700,000, while lending soared from £600,000 to £1.3 million. With the additional financial security, The Stone Company has been able to confidently expand its customer base, take on new clients, and diversify revenue streams, highlighting how the right financial tools can help businesses not only survive but also thrive in demanding times.

A renewed commitment to supporting SMEs

“The partnership with The Stone Company UK illustrates our commitment to delivering flexible and responsive financial solutions. As SMEs continue to drive the UK economy, Novuna remains dedicated to helping them navigate financial challenges and continue building on their successes despite economic pressures.”