Business rates relief welcomed, but SMEs need more help to grow and retain staff

Small businesses will benefit from expanded business rates relief, but business leaders warn that rising employment costs, property expenses and barriers to expansion continue to put pressure on growth. The government’s decision to extend business rates relief to thousands more retail, hospitality and leisure businesses has been welcomed as a boost for small firms, but business leaders have warned that wider reforms are needed to help SMEs expand, invest and retain staff.

While the changes will ease costs for some businesses, concerns remain over the financial barriers facing companies taking on additional premises and the mounting pressure on employers struggling to manage rising wage bills and employee health costs. Max Wilson, chief executive and co-founder of London-based Pocket Storage, welcomed the decision to raise the Small Business Rates Relief threshold to £18,000 for retail, hospitality and leisure businesses, bringing an additional 70,000 businesses within the exemption. “The Chancellor’s decision to increase the Small Business Rates Relief threshold to £18,000 for retail, hospitality and leisure businesses is a welcome move,” he said. “Taking another 70,000 businesses out of paying rates altogether could make a real difference, particularly for independent operators already working with tight margins.”

However, Wilson argued that the government should look beyond helping businesses manage day-to-day costs and consider how policy can encourage successful SMEs to grow. “So much of the discussion around supporting SMEs focuses on helping businesses survive. That’s obviously important, but we should also be asking how we make it easier for successful small businesses to grow,” he said. For businesses seeking to expand their physical footprint, the costs can begin accumulating long before a new location opens. Wilson said that when Pocket Storage considers opening a new site, expenditure can include rent, business rates, planning applications, professional fees, fit-out costs, utilities, insurance, staffing and approvals. Depending on the terms of a commercial lease, Stamp Duty Land Tax may also be payable upfront. “Before the site has even generated any revenue, you’re already committing a significant amount of money,” he said.

Planning delays can add to the uncertainty, leaving businesses with capital tied up in premises that are not yet generating income. Wilson said that although the government had extended the period during which eligible small businesses can retain rates relief on their original property when taking on additional premises from one year to three, further action was needed. “Reducing rates for the smallest businesses is important, but we also need to look at the financial barriers they face when they’re ready to expand,” he said. The pressure is not limited to property costs. For employers, rising employment expenses and the challenge of keeping staff healthy are also affecting decisions about where to spend limited resources.

Dave Capper, chief executive of Westfield Health, said the Budget’s rates relief measures would help some businesses but did little to address the pressures facing small employers. “The rates relief will help, but small businesses’ biggest cost is their people,” he said. “They’ve absorbed higher employer National Insurance, a rising wage floor and day-one sick pay in a very short time, and there’s nothing here to help them keep their people well.” Capper warned that when budgets are tight, employee health support can become an early casualty, potentially creating greater costs for businesses later. “When money is this tight, health support is often the first thing cut. I understand why, but it’s a false economy,” he said. “Lose one key person to long-term sickness in a 20-person business and the whole operation feels it.”

He called for a simpler and more affordable framework to encourage smaller employers to invest in workplace health, including a National Insurance credit for businesses that provide support and a version of the government’s Keep Britain Working standard that smaller firms could realistically meet. Capper also argued that health benefits should not be made more burdensome through additional administrative requirements. The Budget delays mandatory payrolling of employment benefits in kind until April 2027, meaning existing P11D reporting arrangements remain in place for now. Capper said reducing administrative complexity would help employers make better use of the resources available to them. “Health cash plans have pooled risk for small employers for more than 100 years. Government should back that model, not tax it,” he said.

The two business leaders point to different but connected challenges facing SMEs: the cost of securing additional premises and the expense of recruiting, retaining and supporting staff. For companies seeking to expand, decisions about investment are shaped not only by whether they can afford to open a new location, but also by whether they can sustain the workforce needed to operate it. Wilson said the government needed to go further in ensuring that business rates policy encouraged investment and job creation, rather than focusing primarily on helping the smallest businesses remain viable. “We need a business rates system that gives entrepreneurs the confidence to invest in new locations, create jobs and expand their operations,” he said. “Otherwise, we risk making it easier for businesses to stay afloat without doing enough to help them grow.” The Budget’s relief measures offer some businesses welcome breathing space. But for SMEs looking to move beyond survival, the broader question remains whether government policy can address the costs and administrative hurdles that stand between keeping a business running and building it into a larger employer.