The 'final nail in the coffin' for small businesses: Owners consider shutting up shop after Rachel Reeves' tax bomb budget as firms put a stop to hiring staff due to crippling NI hike

Small business owners have declared Rachel Reeves ' Budget 'the final nail in the coffin' as they continue to digest its impacts nearly a week on.

Bosses said they will be forced to axe services, lay off staff or even shut down as a result of Labour's tax bombshell.

They are especially angry at a £25billion hike in employers' national insurance, while others fear the effects of a 6.7 per cent rise in the minimum wage to £12.21 an hour.

Pub landlady Emma Woodhouse warned the higher rate would be 'absolutely crippling' to many hospitality businesses, while the owner of one bar in Manchester warned venues like his could soon become 'unviable'.

Meanwhile, Richard O'Connor, Technical Director at floor matting business First Mats, warned that the national insurance hike would 'significantly' impact its plans to hire new staff.

'Although we are a growing business, the cost burden of the rise in national insurance and the change in the tax threshold will significantly impact our plans for hiring new staff,' he said.

'Unfortunately, Labour has completely ignored the threat of generative AI in their budget, which is now what many businesses will use before hiring new staff, especially for lower-paid work such as admin-based roles .

'The lack of real business experience among the Labour cabinet and ministers means they are completely blind to how financially challenging it is to run a business, and how readily a business will turn to outsourcing and AI to remain profitable.

'It's not about greed; it's about survival. That's why ultimately, it is the working people of Britain who will pay the price for the tax rises.'

Aimee and Richard Bland, aged 39 and 45, owners of Darlington play café CuriosiTeas, had already been smarting from the impacts of inflation, including a £10,000 electricity bill.

Reacting in the days after the Budget, they said the raft of tax rises it contained felt like 'another justification for us to shut up shop and walk away'.

'There are no incentives for small businesses like ours to carry on,' they told the Darlington and Stockton Times . 'The government just doesn't seem to buy into small businesses at all. What's the point in running a business?'

Their concerns were echoed by other business figures today including Zaid Patel, Director at Highcastle Estates, who warned said the rise in employers' national insurance contributions in particular posed a 'significant challenge'.

'In an industry known to have tight margins and intense competition, we're already under pressure to keep costs low while delivering high-quality service,' he said.

'Our clients, landlords, are already feeling the strain from rising interest rates, the increase in regulations, and now the increase in stamp duty, so it's difficult for us to pass on the extra costs.

'However, a positive is the increase will force us to work on making our service more efficient, leading to less hiring and more automation, which is where the world is going.

'Still, the question is, what does that do for the labour market in the UK, where people are already struggling to get work? Ultimately, the consumer always gets hit; in this case, the consumer is the employee.'

Economists have warned that tax hikes will hit the lowest-paid, most labour-intensive jobs the hardest - increasing the risk of job losses.

Daniel Wiltshire, who works at financial planner Wiltshire Wealth, said some business owners were already looking to shut up shop due to the impact of the Budget.

'The small business owners I've spoken to are despondent. I've had lots of questions about the practicalities of moving abroad,' he said.

'Others are looking to wind up limited companies. There's a growing sense that the rewards of entrepreneurship no longer outweigh the risks.

'Discussions with retirees have been equally bleak. Those with large pensions, now locked in an inheritance tax trap, are enquiring about reverse mortgages.

'A surge in equity release arrangements could be the unintended consequence of this dismal Budget.'

Sam Kirk, Managing Director at J-Flex Rubber Products, said the national insurance rise would 'definitely' be causing some bosses to rethink their hiring plans.

And he added: 'Labour have admitted that wage growth could be impacted as businesses struggle - yet again - with the rising cost of employment.'

Nick Kenyon, joint owner of independent Northern Quarter bar and music venue the Peer Hat, warned policy changes risked making venues like his unviable.

'Ultimately, it will lead to price increases which I've tried my hardest to hold off at all costs because it reaches a point where it stops being viable for people to enjoy themselves in this way,' he told Mancunian Matters .

'There is a point that is fast approaching where it becomes untenable to have a music venue in a city like Manchester.'

Meanwhile, Emma Woodhouse, licensee at the Fleur de Lys in Lowsonford, warned that Ms Reeves' Budget would be 'the final nail in the coffin' for many hospitality businesses.

'The combination of increased NIC's for employers along with the change in business rates relief from 75 per cent to 40 per cent will be absolutely crippling for many small businesses in our sector,' she told Kenilworth Nub News .

'Whilst the promise of a more even playing field for rates relief in 2026 was welcome, it may be too little too late for many pubs and restaurants for whom these new measures will be the final nail in the coffin after the continued uncertainty of the last few years.'

It follows warnings women could be driven out of the workforce or have fewer children if nurseries hike their fees as a result of the Budget.

Ms Reeves last week announced increases in staffing costs as she put up the national minimum wage and made changes to employers' national insurance.

Industry leaders warned that childcare providers would have 'no choice' but to pass that onto families with higher childcare fees.

Joeli Brearley, CEO and founder of Pregnant Then Screwed, said there may be sweeping consequences if higher nursery fees have to be met by parents.

'The relentless rise in childcare costs isn't just impacting family budgets - it's reshaping family decisions altogether,' she told the Mail last night.