Government urged to emerge from ignorance following job losses
In a stark warning to the government, the Federation for Small Businesses (FSB) has described the latest unemployment figures as "disturbing." Small businesses in the UK are deeply concerned about the impact of tax hikes, employment regulations, and the Employment Rights Bill on job creation and economic growth.
Key concerns include historically high tax worries, such as rises in national insurance contributions and other levies, which directly increase operating costs for businesses. More than half of businesses (55%) have cited the tax burden as a growing challenge, a sharp increase from historical averages and a six-fold rise since 2021. This escalating tax pressure is causing a collapse in business confidence, with many fearing that additional tax hikes proposed in the Autumn Budget will further stall investment and hiring plans.
The negative business confidence reading (-4.2) reflects widespread concern that higher taxes and regulatory burdens will reduce the environment in which small businesses can thrive. Lower confidence typically aligns with reduced business activity, slower domestic and export sales growth, and cautious hiring, especially among exporters who face additional headwinds such as US tariffs and geopolitical uncertainty.
Small businesses also worry that new employment regulations add to compliance costs and administrative burdens. These concerns can discourage them from expanding their workforce or taking on new employees due to increased costs and risks, thereby hindering job creation.
Tina McKenzie, FSB chair, stated that increasing jobs taxes, employment legislation, and employer pension costs is not beneficial for job creation and economic growth. She urged the government to improve the planned employment legislation, support small employers to make rises in statutory sick pay affordable, and create attractive conditions for starting a business.
The situation is more than alarming for the economy and the communities in which these hard-working businesses operate, according to McKenzie. The FSB has urged the government to address tax hikes and employment regulations due to consecutive months of job losses.
The unemployment rate grew to 4.7 per cent, a four-year high, according to ONS data. The number of vacancies in the UK fell by 56,000 in three months to 727,000, marking the 36th consecutive period where they have decreased. Twice as many small businesses shed staff in the second quarter of 2025 than increased their employee numbers. In the year to June, some 178,000 people were pushed out of work.
For the first time in 15 years, more small businesses expect to shrink or close over the next 12 months than expect to expand. The government's Employment Rights Bill, which includes measures like banning zero-hours contracts and 'fire and rehire' practices, is being pushed ahead. Over half (54%) of small and medium-sized businesses fear collapse if faced with one more major cost increase, highlighting the fragility of many small businesses under current fiscal and regulatory pressures.
The falling vacancy numbers and job losses have prompted concerns about the UK's economic future. The FSB and small businesses are calling on the government to provide relief in the upcoming Autumn Budget to foster a more supportive environment for growth and job creation in the UK.
- The Federation for Small Businesses (FSB) warns that the recent unemployment figures are disturbing due to concerns about the impact of taxes, such as national insurance contributions and other levies, on job creation and economic growth in small businesses.
- The FSB is concerned that the tax burden on businesses is escalating, causing a collapse in confidence, and that further tax hikes proposed in the Autumn Budget could stall investment and hiring plans.
- Small businesses worry that new employment regulations add to compliance costs and administrative burdens, potentially hindering job creation.
- Tina McKenzie, FSB chair, urged the government to improve employment legislation, make statutory sick pay affordable, and create attractive conditions for starting a business to avoid job losses and foster a supportive environment for growth.
