Economy in crisis as one million firms face closure after Labour's jobs tax - 'Rachel Reeves gets 1 out of 10 for first year in office'

The alarming findings come from Simply Business's SME Insights Report found that 18 per cent of the country's 5.5 million small businesses fear they will be forced to shut down permanently.

This potential loss of almost one million businesses comes as the Employment Rights Bill progresses through the House of Lords, threatening to add further regulatory burdens to firms already struggling with rising costs.

Reflecting on the economy the past year, leading entrepreneur Luke Johnson has delivered a damning verdict on Rachel Reeves' performance as Chancellor, rating her "one out of ten" as she approaches her anniversary in the role on Saturday.

Johnson, whose investments have included Gail's and Pizza Express, told the Standard that "the mood among the investors, entrepreneurs and business leaders I talk to is close to despair about the prospects for the UK and the leadership of the Government."

The hospitality veteran had previously warned on BBC Radio 4's Today programme that companies would face "really tough choices" following the Autumn Budget tax rises. He described the measures as "a tax on jobs, a tax on work" and "a regressive tax because it will hit low earners."

The Simply Business research reveals that business confidence has plummeted dramatically over the past two years. While only 25 per cent of SME owners expected economic deterioration in 2023, this figure has now doubled to 50 per cent.

The crisis is forcing difficult decisions across the sector. Some 43 per cent of businesses plan to raise prices by up to 29 per cent to offset mounting costs, whilst a quarter say they will need to use personal savings to prop up their operations.

SMEs, which account for 60 per cent of private sector employment and generate £2.8 trillion in annual turnover, are vital to Britain's economic success.

Yet profit expectations have collapsed, with only 17 per cent now anticipating increased profits compared to 43 per cent in 2023.

The impact on individual businesses is severe. Amanda Burwell, owner of online resort wear company Ollie Burwell, said "it's practically impossible to make any profit any more" with escalating costs including electricity, minimum wage increases and National Insurance payments now starting from earnings at £5,000.

Adam Billiald, who founded natural products manufacturer Embracing Nature Ltd in 2021, noted that "consumer confidence has noticeably been impacted by the cost of living and consumers are more focussed on getting great value for money than ever before."

Johnson warned that for labour-intensive businesses like hospitality or retail, the tax increases are "enormously discouraging," forcing companies to make choices about "whether we cut back on growth or we employ fewer people or we change shifts."

Small business owners are calling for urgent Government intervention to prevent widespread closures. The Simply Business report found that 27 per cent of SMEs want the government to simplify the tax process, whilst 24 per cent are demanding a reversal of the employer's National Insurance increase.

Despite the grim outlook, 57 per cent of businesses remain confident about their prospects over the next 12 months. However, one in ten could be forced to let staff go if conditions don't improve.

Simply Business UK CEO Julie Fisher warned: "Seeing so many SMEs across the UK struggling is a serious cause for concern, not just for the founders of these businesses but for the British economy and our wider communities.

"We must do everything we can to protect, support, and celebrate their spirit and resilience."