One in eight small and medium-sized business (SME) executives in the UK plan to move themselves, their businesses or both offshore as taxes rise and regulatory costs rise, according to a new report from Rathbones.
The study, published just weeks before Chancellor Rachel Reeves presents her autumn budget, paints a bleak picture of business confidence across the UK private sector.
If the potential exodus is realized, around 680,000 of the UK’s 5.67 million SMEs could be affected – a prospect that analysts say would hit jobs, tax revenues and economic growth.
Of SME leaders planning to relocate, a third are considering moving their business abroad, with Ireland, Dubai and the US among the most popular destinations.
A further 26 per cent of business owners expressed growing concern about the UK tax environment, even if they have no immediate plans to relocate.
The survey found that dissatisfaction extends far beyond taxation: two-thirds of SMEs believe the government is not doing enough to encourage business growth and more than 40 percent say current policies are not actively supporting business.
Rathbones said many respondents pointed to higher employers’ social security contributions, increases in the national living wage and complex new regulations as key factors undermining their ability to grow.
“SMEs are the backbone of the UK economy and the fact that many are considering leaving for tax reasons is deeply worrying,” said Ade Babatunde, senior financial planning director at Rathbones.
“Their departure would mean the loss of valuable jobs and tax revenue at a time when the government is trying to stimulate growth.”
The findings come at a time when several business groups are sounding the alarm about the impact of government policies on smaller businesses. The British Chambers of Commerce have reported that small exporters are struggling with post-Brexit trading rules, while insolvency specialist Begbies Traynor recently reported a sharp rise in SMEs finding themselves in critical financial distress, particularly in consumer-facing sectors.
Many small businesses are also preparing for possible changes to income tax, capital gains tax and corporate taxes in the upcoming Reeves budget, following last year’s increases in employer welfare and capital gains tax.
With SMEs employing 60 per cent of the UK workforce and representing 99 per cent of private sector businesses, experts warn that continued fiscal pressure on small businesses could slow investment, discourage hiring and weaken long-term economic growth.
“The government needs to provide more targeted support to SMEs, whether through tax relief or through measures that incentivize growth and risk-taking,” Babatunde added.
“Otherwise there is a risk of a significant brain drain of talent and business at a time when the economy can least afford it.”
The warning adds to growing pressure on Reeves to reassure business leaders that their financial plans won’t place additional burdens on small businesses. Amid signs of rising unemployment and a slowdown in private investment, economists say the autumn budget could be crucial in determining whether the UK remains a competitive base for entrepreneurs.
Analysts expect Reeves to focus on closing the tax gap and finding new sources of revenue, but business groups have urged the Treasury to avoid drastic tax hikes that could deepen economic stagnation.
As one industry leader put it: “Britain cannot tax its way to growth – it must support the very people who make it.”
