Parliament’s Business and Trade Committee has told ministers to rethink the Government’s response to small business proposals, warning that existing plans do not adequately address the cost pressures facing UK SMEs.
The committee has asked the Department for Business and Trade to reconsider what it described as an “inadequate” response to recommendations designed to improve small business growth, high street resilience, and the trading environment for smaller companies.
The intervention came ahead of an appearance by Secretary of State Peter Kyle on 7 July. The committee said the Government had fully accepted only six of its 36 recommendations after an inquiry that heard from small businesses about the cumulative burden of policy decisions and operating costs.
Its February report warned that small companies across the UK were facing cost pressures comparable to those seen during the pandemic, but without pandemic-style support. The committee’s latest response argues that ministers have too often repeated existing schemes and commitments rather than confronting the practical problems raised during the inquiry.
Six areas were identified as requiring urgent fresh proposals: procurement, tax, energy costs, the cost of crime, bogus self-employment, and protections for franchisees. Ministers have been asked to return within two months with a new response.
On tax, the committee said Treasury ministers had failed to engage properly with recommendations covering business rates, VAT, and tax administration. It also cited research from Professor Ben Lockwood showing that a one percentage point reduction in the tax rate reduced the vacancy rate for eligible high street properties by 5%.
The committee also pointed to rising energy standing charges, expected increases in business rates, and higher minimum wage and Statutory Sick Pay costs. It said the Federation of Small Businesses had described a new “cost crunch” since the report was published.
Rt Hon Liam Byrne MP, Chair of the Business and Trade Committee, said: “Small business is the backbone of Britain’s economy, but too many now feel they are carrying a burden that is becoming impossible to bear.
“When we published our report in February, we warned that many firms were facing cost pressures comparable to the pandemic. Since then, those pressures have only intensified.
“We welcome the Government’s willingness to listen in some areas but too often it is repeating existing announcements, not confronting the problems businesses told us about first hand.
“Growth begins with small business. If Britain is serious about growing the economy, reviving our high streets and creating good jobs, we need a bolder, more ambitious plan to help small firms invest, hire and thrive. That is why we are asking ministers to think again and come back with a response that rises to the challenge.”
The criticism lands during a difficult period for smaller companies. Many are still dealing with weak demand, wage pressure, elevated borrowing costs, energy volatility, and changes in tax administration. For owner-managed companies, the pressure often sits in the same place: cash flow. Costs rise before prices can be passed on, delayed payments disrupt planning, and compliance demands absorb management time that would otherwise be spent on sales, hiring, or investment.
Late payment remains one of the most persistent connected pressures, with new reforms designed to sharpen supplier rights as the Small Business Commissioner prepares for stronger enforcement powers. That reform track addresses one part of the problem, while the committee’s latest intervention points to a wider need for coordination across tax, procurement, energy, crime, and labour market rules.
Procurement is a recurring fault line. Public sector contracts can provide revenue stability and credibility for smaller companies, but complex tendering processes, insurance requirements, payment terms, and administrative thresholds often favour larger suppliers. A stronger small business plan would need to reach contract design, lot structure, payment discipline, and practical access, rather than stop at broad encouragement.
Business rates remain another structural issue. High street companies face property-linked taxation at a time when consumer behaviour, online competition, wage costs, and local footfall are all shifting. The committee’s warning over vacancy rates reflects a wider concern that local economies cannot be rebuilt if fixed property costs make marginal sites unviable.
Energy costs continue to sit in the background, even where wholesale prices have moderated from crisis peaks. Standing charges, contract terms, poor access to competitive deals, and uncertainty around future energy pricing can hit smaller companies harder than larger buyers with specialist procurement teams.
The cost of crime has become a further pressure for retail, hospitality, and service companies. Theft, anti-social behaviour, fraud, and local policing gaps can impose direct losses while also increasing insurance, security, and staff safety costs. In many high street businesses, those costs interact with already thin margins.
The committee’s focus on bogus self-employment and franchise protections broadens the issue from cost to fairness and market structure. Operators that compete by misclassifying labour or shifting commercial risk unfairly through franchise contracts can put compliant businesses at a disadvantage.
Small business support cuts across several departments. Tax sits with the Treasury, crime with the Home Office and local policing structures, procurement across government, employment classification with labour market enforcement, and energy with wider infrastructure policy. A credible response will require coordination as well as new announcements.
The demand from smaller companies is direct: fewer avoidable shocks, faster payment, clearer rules, and a tax and compliance system that does not absorb a disproportionate share of limited management capacity. The committee’s intervention increases pressure on ministers to show that the growth agenda can reach the smallest employers as well as large investors and headline industrial sectors.
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