Small businesses across the UK endure pressures similar to those during the pandemic, driven by escalating energy costs, higher taxes, and rampant crime that threaten high streets. The Business and Trade Select Committee highlights a lack of coordinated government support, unlike the emergency measures provided in 2020.
MPs Highlight Dire Warnings for High Streets
The committee reports that small and medium-sized enterprises (SMEs), which comprise 99.8% of all UK businesses, form the backbone of local economies and high streets. Recent changes to employer national insurance contributions burden retailers with an additional £7 billion annually, while the hospitality sector reports 69,000 job losses linked to these measures.
Businesses also grapple with soaring electricity prices, retail crime costing £4.2 billion yearly, and persistent late payments. Data from 2024 reveals an average of 38 shop closures daily on British high streets.
Liam Byrne, chair of the Business and Trade Committee, states: “High streets do not die by accident. If the government is serious about growth, it must set out a more coherent and ambitious plan for the businesses that make up so much of the UK economy.”
Byrne adds that evidence from firms shows stark realities: “Many small businesses are now operating under pressures comparable to those experienced during the Covid pandemic but this time without an emergency support framework in place. SMEs are facing late payments, rising energy costs, increasing crime, a complex tax system and barriers to growth that are compounding rather than easing. These pressures are not isolated; together they pose a real risk to business viability, high streets and economic growth.”
The committee urges reforms, including crackdowns on late payments, adjustments to VAT and business rates, and targeted energy bill relief.
Tesco UK Boss Warns of Broader Economic Challenges
Ashwin Prasad, UK boss of Tesco, echoes these concerns at a Resolution Foundation conference, noting: “Each time you add a new cost, money has to come from somewhere – in the past five years we’ve already seen all sorts of new costs for labour, costs for energy and costs for regulation.”
Prasad also addresses the growing issue of economic inactivity, with over nine million working-age individuals—more than a fifth of the population—neither employed nor seeking work, often due to long-term illness. He warns: “We have been sleepwalking into a quiet epidemic that is keeping millions of people out of work. There has been a clear gradual change over the last decade or so. Far fewer people are in work than there could be.”
Continuing, he emphasizes: “This means that instead of investing parts of national life that might stimulate investment and growth into the wider economy we are spending an ever increasing proportion on our national income on out of work benefits. We cannot afford to be a country that leaves the next generation to languish on the sidelines. A country that makes that kind of mistake is not going to be a country that finds ways to innovate, to grow its economy and improve its standing on the world stage.”
These insights align with recent analyses, including a Begbies Traynor report identifying over 67,000 companies in critical financial distress and Resolution Foundation predictions of a potential “zombie apocalypse” among struggling firms.
