Small firms reeling from pandemic-style pressures as high costs, taxes and crime ravage the High Street

Small firms are facing pressures ‘comparable to the pandemic’ as rising energy costs, taxes, and crime ravage the high street, MPs have warned.

Much of the pain is being caused by Labour’s policies but the Business and Trade Select Committee cautioned that, unlike in 2020, there is no coordinated government response to ease the mounting problems.

It came as, separately, the UK boss of Tesco also warned of the surge of costs facing firms large and small as well as the growing ‘epidemic’ of worklessness across Britain.

And it adds to evidence that British firms are struggling to survive under Labour, with a bleak report last month from advisory firm Begbies Traynor warning more than 67,000 companies were in ‘critical financial distress’.

Think-tank the Resolution Foundation has even warned that a ‘zombie apocalypse’ of struggling businesses could be on the way.

Liam Byrne, chair of the business and trade committee, said: ‘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.’

The report noted that small and medium enterprises (SMEs) account for 99.8 per cent of all UK businesses and ‘form the backbone of local economies and high streets’.

Last year’s raid on employer national insurance is hitting hard with retailers estimating that the changes are costing them an extra £7billion a year while the hospitality sector has suffered 69,000 job losses partly thanks to the measures.

On top of that, firms are having to cope with sky-high electricity costs, retail crime costing £4.2billion a year and the burden of late payments.

MPs cited figures from 2024 showing an average of 38 shops a day closing on Britain’s high streets.

They are calling for a series of reforms including a clampdown on late payments, reforms to VAT and business rates and targeted support with energy bills.

Mr Byrne said the evidence from firms ‘was stark’.

‘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,’ he said.

‘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.’

It came as Tesco UK boss Ashwin Prasad told a conference hosted by the Resolution Foundation think-tank yesterday: ‘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.’

And he added his voice to warnings about the crisis of economic inactivity – with nine million people or more than a fifth of the working age population neither working nor looking for work, many of them due to long-term sickness.

Mr Prasad said: ‘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.

‘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.’