Businesses 'punished by last Budget' fearful for what's next

Katya Milavic-Davies says she's had to increase her turnover across four salons by £500,000 to make up for National Insurance contributions and minimum wage hikes

High Street businesses still grappling with the economic fallout of the last autumn's Budget are "fearful" about what the latest one could bring.

"It was a kick in the teeth," says Katya Milavic-Davies, who owns four Myla and Davis hair salons, as well as the restaurant Llewelyn's and the cafe Lulus, both in Herne Hill in south London.

She says she had to increase her turnover across her four salons by £500,000 to cover the costs of the National Insurance contribution (NICs) hikes, and a national minimum wage rise, adding that businesses like hers had been "punished" for having a large number of employees.

"We've obviously had to pass on those costs and try and put up our prices as much as we can" but "there is a ceiling and... we're seeing the strain."

'Razor-thin margins'

New figures from the Federation of Small Businesses, which is calling on Chancellor Rachel Reeves to reduce the small business tax burden and the impact of employment cost hikes, reveal that nearly one in three small firms expect to shrink, sell up or shut down in the next 12 months.

Across the UK, 86% of small businesses fear the possibility of Budget announcements that, in their view, could negatively impact their plans for growth – according to new research from Novuna Business Finance.

In a YouGov survey of 1,244 small businesses across the country, rises to taxation and fuel duty topped the list of employers' concerns.

"It's hard not to feel as though we, as the employers, are not being treated as working people," Ms Milavic-Davies says.

She says there is a "misunderstanding about employers having these bottomless reserves" but in the hospitality and personal care sectors, margins are becoming "razor thin".

The Myla and Davies salon in Herne Hill is one of four Ms Milavic-Davies owns in south London

UK Hospitality, the industry's trade body, estimates more than 100,000 jobs have been lost in the sector since the last Budget.

"Unless we see changes on the 26th November we will see more jobs lost and more businesses close" according to its chief executive Allen Simpson, who is calling for a reduction in business rates, reduced National Insurance contributions and lower VAT to match other European countries.

"We need a Budget which is equally positive for hospitality to repair the damage."

Allen Simpson, CEO of UK Hospitality, is calling for a reduction in business rates, NICs and VAT

Approaching this year's Budget is "like knowing you have an appointment at the dentist", according to Charlie Gilkes, the co-founder of Inception Group which operates a collection of bars in London.

"You know it's going to hurt and you just want to get it over and done with," he says.

The entrepreneur is still nursing his wounds from the last Budget, but is hopeful "there might be some white rabbits up the chancellor's sleeves".

Mr Gilkes would like to see "a fair rebalancing" of "disproportionately high" business rates and a cut in VAT to match Ireland's reduction from 13.5% to 9%, effective from July 2026.

Bar owner Charlie Gilkes says waiting for the upcoming Budget is like waiting for a dentist appointment

Mr Gilkes opened his 90s-themed bar Bunga 90 in Covent Garden in September.

"Before the last Budget we had plans to open two to three," he says. "Each site we open is creating seven figures of revenue for the Treasury.

"If they do help us we can help with the growth agenda but if it's anything like last year, it'll do the exact opposite.

"It's been the perfect storm since Covid. If we get those measures we can thrive and be part of the growth story for this country."

'Local dynamism'

Ms Milavic-Davies wants to see "a more sophisticated tax system" which recognises that "we are drivers of employment resilience on the High Street".

"It's only by looking after these employment-heavy industries that you're able to look after local dynamism and make sure you have shops open."

A government spokesperson said: "Pubs, restaurants and cafes are vital to local communities, that's why we're cutting the cost of licensing, lowering their business rates and helping more hospitality businesses offer pavement drinks and al-fresco dining, on top of cutting alcohol duty on draught pints and capping corporation tax."

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