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Written by: Jonathan Munnery
As many as one in four SMEs across the UK will struggle to cover their payroll costs from April this year, according to a recent survey of accountancy professionals.
It is understood that incoming increases to National Insurance Contributions (NICs) will add notably to the financial challenges facing SMEs throughout the country.
Those increases are being introduced as levies intended to help the government cover the costs of health and social care provisions nationally but there are some clear indications that many businesses will feel the financial impact.
Research into the issue has been conducted jointly by the Association of Chartered Certified Accountants (ACCA) and the Corporate Finance Network (CFN), with data being collected from accountancy professionals reflecting on sentiments among their clients.
The view from those professionals currently is that around 26 per cent of SMEs will find it tough to cover their payroll costs in April and 21 per cent might run out of money entirely within the next 12 months.
According to the figures, over a third (38 per cent) of SMEs feel confident about their growth prospects in the next six months but there is also widespread uncertainty about what financing options are potentially available to support cashflows.
The view from the ACCA and the CFN is that the British government should reconsider its decision to increase NICs for businesses and do more to help SMEs over the course of this year and beyond.
“UK SMEs have already endured prolonged financial strain with 6 per cent of UK SMEs expressing they are unable to cope,” noted Kirsty McGregor, founder of the CFA.
“While SMEs remain hopeful and the findings demonstrate an appetite for future growth, the onus rests on the government to support SMEs, to provide them with the resources that they need, instead of placing more hurdles for them to overcome,” she added.
Claire Bennison, head of ACCA UK, agreed that decisionmakers in Westminster should think again about their policy on NIC increases.
“The government needs to seriously consider the economic implications of the planned hike in National Insurance rates and the impact it will have on UK SMEs who serve as a backbone to the UK economy,” she said.
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