The Government must encourage rather than penalise small businesses at a time when many are being squeezed by tax rises and mounting cost pressure, according to the BCMPA, the Association for Contract Manufacturing, Packing, Fulfilment and Logistics.
The Association’s CEO, Emma Verkaik, warned that SMEs are feeling the pinch ahead of November’s Budget, with policy changes coming too fast and impacts not being fully assessed. The BCMPA represents over 200 contract manufacturing, packing, and fulfilment companies in the UK, across a wide range of sectors from food, drink, personal care, chemical and pharma. Many of these businesses are SMEs.
The Chancellor of the Exchequer, Rachel Reeves, has done little to ease fears following her pre-Budget speech, feeding into further uncertainty and a lack of confidence – two major obstacles to growth and investment.
“SMEs are the backbone of the UK, providing valuable income and security to communities,” said Emma Verkaik. “They give stability but are currently shouldering a huge burden – one that we fear is unlikely to change soon.
“The rise in National Insurance contributions from employers has contributed to a significant recruitment slow down and a capping in pay rises. This makes it difficult for SMEs to invest and grow, adding pressure to the existing workforce where they are already at capacity and making long term expansion plans very difficult.”
The lack of growth and low confidence has also resulted in companies being unable to invest in automation, with a number of BCMPA members reporting that they are cutting back or pausing investment in capital expenditure until they can be sure of shouldering the increased cost burden. SMEs are also halting new hires which include the taking on of vital apprenticeships, with higher costs being passed onto customers creating further inflationary pressure.
To combat this, the BCMPA has called on the Government to do all it can to ease National Insurance contributions, cut red tape and bring down energy bills. It also wants the establishment of ‘SME Impact Assessments’ for all new policies to ensure that regulation doesn’t disproportionately burden small firms.
“Energy bills are staggeringly high and while the Government has advised that there will be some potential relief for large energy consumers, this is still some way off,” said Verkaik. “UK firms are less competitive against their international rivals and although relief is likely to arrive in 2026/27, the short-term pressures remain. And smaller manufacturers may not benefit in the same way as larger energy intensive manufacturing firms.
“In addition, members in the packaging industry are getting to grips with the introduction of Extended Producer Responsibility (EPR). This change encourages brands to increase their use of recycled materials, which is also driving up packaging prices of recycled material. While sustainability is a key issue for the industry and a once in a lifetime restructure, there is a danger that EPR will create more burdens on overstretched workforces to provide detailed reporting. It creates a new industry of its own with compliance schemes loading additional costs onto firms, which are already stretched.”
The BCMPA hopes that the Budget will go some way to easing uncertainty in the UK’s economy but warns that more consideration of SME’s plight is needed before any additional costs are loaded onto business.
Verkaik added: “Sometimes in all the doom and gloom, business owners need to see the light at the end of the tunnel. That is what drives entrepreneurs get up in the morning and want to succeed. Let’s hope the Chancellor wakes up to this before we have an even larger problem in the UK.”