More than half of the small and medium-sized business decision-makers questioned for a new survey believe the government is not on their side, as companies continue to face pressure from energy, taxation and employment costs.
Polling commissioned by the Centre for Policy Studies found that 57% of respondents felt unsupported by government, compared with 28% who believed it was on the side of businesses like theirs.
The research, published on 17 October, was conducted by Opinium among 500 senior decision-makers at UK SMEs. It provides a measure of business sentiment ahead of the Budget rather than an independent assessment of government performance.
Energy costs emerged as the most frequently mentioned challenge, cited by 36% of respondents. Business rates and employment costs followed at 26% each, while VAT and shortages of skilled workers were each mentioned by 17%.
The distribution of concerns reflects the different ways in which recurring expenditure influences smaller businesses. Energy costs affect premises and production, employment costs determine the affordability of staffing, and property taxation can impose substantial fixed liabilities.
Some 54% of respondents believed that the combined burden of tax, regulatory compliance and administration had increased since Labour took office. Only 4% believed that burden had decreased.
These are perceptions recorded through polling, not audited changes in costs. Individual respondents may be affected by different regulations, taxes and commercial conditions, and their interpretation of what has changed can vary.
The survey also found concern about wealth and inheritance taxes, with 49% expressing unease about their potential effects on businesses. Such measures may be particularly relevant to succession planning and the ownership of family-controlled enterprises.
Despite the negative assessment of government, the research did not show a uniformly pessimistic outlook for company performance. More businesses expected to grow than to contract over the following two years.
That distinction is important. An owner may believe taxation has become more difficult while still anticipating increased customer demand, a new product launch or opportunities to expand into additional markets.
The polling explored alternative tax arrangements. Some 45% of respondents supported a tapered VAT system, compared with 17% opposed. A proposal allowing qualifying smaller companies to pay tax on turnover rather than profit was viewed favourably by 40%, against 17% who found it unappealing.
Those responses show interest in possible changes, but they do not establish the consequences of implementing them. Turnover-based taxation, for example, could have substantially different effects on high-margin professional services businesses and low-margin retailers.
A tapered VAT system would also require decisions about thresholds, registration, administration and the treatment of businesses whose sales fluctuate. Any simplified system must be assessed against both compliance costs and the distribution of liabilities.
The Centre for Policy Studies has its own policy priorities, including tax reform and entrepreneurship. Its recommendations should be distinguished from the survey data gathered by Opinium.
There are also limits to the sample. The results reflect the views of 500 decision-makers, not every UK SME. They cannot establish precisely how each category of business, industry or region experiences government policy without more detailed breakdowns.
The research follows separate official findings about the pressures affecting UK employers. Although both studies identify cost concerns, they use different research populations and questions, so their percentages should not be treated as directly comparable.
The October Budget will provide the next indication of how ministers intend to address some of those concerns. The practical effect on business confidence will depend on which measures are adopted, how they are administered and whether operating conditions improve after implementation.
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