Autumn Budget 2024: pressure rises for small businesses

On 30 October, Chancellor Rachel Reeves delivered the first Budget of the new Labour Government.

Amongst a plethora of announcements, major updates included increased taxes on employers, additional funding for the Department of Health and Social Care, and increased spending in public services and infrastructure. OT broke down the 2024 Autumn Budget here.

The Budget has been met with a mixed reception – while additional funding for the NHS has been welcomed, increases in taxes are set to hit small businesses, even with measures in place to reduce the impact.

OT asked businesses across optometry for their thoughts on the budget and what it might mean for their practices.

Cost pressures on practices

The AOP has published a summary of the Government budget and what it means for optometry, noting that the budget has placed increased pressure on practices.

The increase in employers National Insurance (NI) contributions from 13.8% to 15% and reduction in threshold of when NI contributions must be paid to £5000 is “another unwelcome cost pressure on many practices,” the AOP suggested.

For some small practices, the increase in the threshold of Employment allowance from £5000 to £10,500 may help to offset the rise, the AOP noted.

“However, for the wider primary eye care sector, the cost of delivering NHS sight testing services will have been increased by this change to NI, that in conjunction with additional changes to minimum wage and the wider wage pressures this will trigger, will be unwelcome for many practices,” the briefing outlines.

Significant impact of employer contributions

Andrew Bridges, director of professional services at Leightons Opticians & Hearing Care, reflected on the Budget: “We would naturally welcome any additional funding for healthcare and the NHS, and it may be of interest that the Government has prioritised the NHS in Phase 1 of the spending review.”

“However, HM Treasury allowance for public sector bodies in its employer contributions has not been matched for independent contractors to the NHS such as GP surgeries, dental practices, and optical practices,” he said.

Agreeing that the combined impact of the reduction in the NI threshold and increased employer contributions would have a “significant” effect on many employers, he said: “This is quite likely to lead to retail price rises across many sectors, not just optical, and the resultant inflationary pressures.”

The 6.7% increase in national living wage is positive news for employees on those scales, but poses an additional challenge for their employers, Bridges said.

He emphasised: “The increased burden of unsupported employment costs for independent NHS contractors must be raised in the OFNC’s negotiations to ensure a fully funded GOS sight test fee is achieved.”

The increased burden of unsupported employment costs for independent NHS contractors must be raised in the OFNC’s negotiations to ensure a fully funded GOS sight test fee is achieved

A “huge” impact on business

Claire Ranger, owner and principal optometrist of Hammond & Dummer Bespoke Opticians in Milton Keynes, explained that the changes to employer NI contributions would have “a big impact on how much NI tax we have to pay as a small business.”

The Employment allowance will help, Ranger said, “in the first few months, but then we will have larger tax bills for the rest of the year.”

Meanwhile, “increasing minimum wage by 6.7% to nearly £24,000 for a 37.5 hour week will obviously also increase our costs from April.”

Pointing to the economic forecasts, she suggested that there will not be an increase in takings to cover wage rises.

“Employing staff is becoming even more difficult, especially with the proposed changes to day one benefits coming,” she added.

“This new budget has a huge impact on the business – we now have to look at how we can increase our turnover, or cut costs to cover these changes in order to survive the next few years,” she said.

This new budget has a huge impact on the business – we now have to look at how we can increase our turnover, or cut costs to cover these changes in order to survive the next few years

Small business owners forgotten

Dr Valarie Jerome, optometrist and owner of Valarie Jerome Optometrists in Newbury, told OT: “A huge part of the public – and I would argue most of the Government – doesn’t value the cost of eye care and eyewear, or healthcare in general.”

“The costs are going up for a small business and where we can’t eat the cost like some larger businesses, we will have to pass the cost down to patients and customers who already don’t want to pay the price now. I believe that will drive people away from our independent businesses and to the discount bargain opticians,” she added.

Recognising the positives of the support available for employees in the UK, Jerome reflected on the pressures facing small businesses, sharing: “I feel like the small business owner is forgotten as an employee – we are expected to somehow just put up with it and go without – because we have the ‘pleasure’ of running a business. The focus of any government should be on the business owner as well as the employee.”

A huge part of the public – and I would argue most of the Government – doesn’t value the cost of eye care and eyewear, or healthcare in general

Jerome shared that business rates prevent her from moving the business to a larger unit.

“When you think about it, business rates actually suppress my business. They stop it from growing as I cannot justify the increased costs, as I have a discount now due to the size and value of my rental space,” she shared.

The news of business rates reform in the budget is welcome, but Jerome adds: “I won’t believe it until I see it.”

In response to the budget announcements, Jerome shared a story from practice: “What I would say to the Government is exactly what someone said to staff this week. A patient walked into my practice as his wife saw me and purchased spectacles here, telling him that we take good care of patients and offer great quality products.

“When told the price of an eye exam and what a new pair of glasses would cost, he said: ‘Is that the best you can do?’

“I’d ask the Government to spend a day with me and look at the costs to run my business. I would then ask them to consider what they are doing for small businesses in this country and, ‘Is that the best you can do?’” she concluded.

Business rates actually suppress my business

Catalyst for growth

Anna Lewin, partner and clinical lead optometrist at Haine & Smith, told OT that the budget introduces several challenges for small and medium-sized optical groups.

The increase in NI contributions and minimum wage will place an “enormous financial strain on independent practices,” she said.

“Supporting a fair wage is vital for the health and growth of our teams, and the uplift to minimum wage recognises the dedication of frontline teams,” Lewin said.

The challenge for businesses lies in balancing this with rising operational costs, she noted.

Lewin described the budget as a “prompt” to refine processes and look for efficiencies without passing on higher prices to patients.

She shared: “When faced with higher contributions for each team member and substantial increases in operating costs, we must ensure we manage our budgets effectively and have efficient processes in place.”

“We are committed to rising to these new challenges with a proactive approach,” Lewin added.

“Ultimately, these adjustments, while challenging, can serve as a catalyst for growth, encouraging us to innovate and adapt our practices. In the long run, we hope they will strengthen our resilience and enhance the quality of care we provide to the community.”

Supporting a fair wage is vital for the health and growth of our teams, and the uplift to minimum wage recognises the dedication of frontline teams

Business decisions accelerated

Martin Ashcroft, chief financial officer at Hakim Group, told OT: “This Autumn Budget brings with it an increased financial burden that could significantly impact small, independent practices in the optical sector.”

Increases to minimum wage and NI contributions means that many practices “already operating against significant increases in labour costs since COVID-19, will need to make challenging financial adjustments,” he said.

Inflation has driven supplier costs up, squeezing margins, he suggested, adding: “While independent practices will strive to find efficiencies and reduce costs without compromising patient care, the reality is that some of these additional expenses may ultimately be passed on to patients.”

This raises concerns about affordability and continuity of care for communities relying on accessible eye care, he noted.

“This compounded pressure, especially following several years of economic volatility, risks destabilising the financial resilience of many small practices and intensifies the urgency for them to innovate and find new ways to improve productivity,” Ashcroft said.

This Autumn Budget brings with it an increased financial burden that could significantly impact small, independent practices in the optical sector

Meanwhile, Luke Wren, chief development officer at Hakim Group, noted that the budget announcement has “catalysed” a trend of practices reviewing their exit strategies due to the immediate rise in capital gains tax.

“We have seen an increasing number of practices looking to complete their sales and exit ahead of the recent budget changes,” he said.

This has accelerated the number of practice owners exploring their options, a pattern he expects to see repeated ahead of the next capital gains tax rise in early April.

“Business owners recognise the current pressures and are exploring options that might offer greater long-term stability, as practice owners seek ways to mitigate risk while ensuring they can continue delivering high quality patient care,” he said.

Growth is the true test

The Federation of Small Businesses (FSB) welcomed the increase in employment allowance for small businesses.

Tina McKenzie, policy chair of the FSB, suggested this move would “shield the smallest employers from the jobs tax.”

“The decision to protect small businesses from an inflationary hike in business rates – by freezing the small business multiplier – will help small firms with premises across all sectors,” she added.

McKenzie suggested that the “true test” of the budget would be whether small businesses can grow and “end the economic stagnation the UK has been stuck in.”

“Larger small, and medium-sized businesses will struggle with the rises on employer national insurance on top of the large costs from the Government’s employment law plans. We’ve been very clear in our warning of the difficulty SMEs will be confronted with in meeting all of these changes at once – and the potential impact on jobs, wages, and prices,” she said.

Looking over the measures announced by the Chancellor against a “challenging backdrop,” McKenzie suggested the budget revealed a “clear direction in business policy now for the whole of this Parliament to target support at small businesses, rather than big corporates – prioritising everyday entrepreneurs working in local communities in all parts of the country.”

NHS support welcomed, but NHS sight test funding needed

The AOP welcomed the announcement of £22.6 billion of funding for the Department for Health and Social Care from 2023–24 to 2025–26.

“It has been clear for some time that secondary care is under immense strain with significant waiting lists, of which ophthalmology is one area under continued pressure and where patients are struggling to access care,” the briefing states.

“That is why we have been making the case for how optometry can help to tackle the ophthalmology backlog and save the NHS money,” the AOP continued, but emphasised that to enable this to happen, a portion of the funding must be directed to the “chronically underfunded” NHS sight testing service.

Read the full policy briefing on the AOP website.

Lewin, from Haine & Smith, acknowledged the funds allocated in the budget for the NHS, but noted that the distribution of these funds “may not significantly impact High Street optometry services.”

“However, it shows support for public health, which we hope will extend to include community-based healthcare, and in particular, optical care,” she added.

It shows support for public health, which we hope will extend to include community-based healthcare, and in particular, optical care

Leightons Opticians & Hearing Care supported the Government’s plans to bring NHS waiting lists down to below the current target of 18 weeks, Bridges said, “and in line with their desire for more health care services to be delivered in a primary care setting, optical practices and their skilled workforce can support this.”

However, he highlighted: “it must be appropriately funded and not subsidised by optical practices.”

Matthew Taylor, chief executive of the NHS Confederation, said: “This budget is an important first step towards putting the NHS back on to a sustainable footing, with a vital real terms increase in revenue funding and a massive boost to capital funding.”

The capital funding is crucial to enable the health service to boost productivity, he said.

Acknowledging the Chancellor’s comments that it will take more than one budget to “build an NHS fit for the future,” Taylor said: “This budget is the down payment on the Government’s planned NHS reform, with the next phase expected to come with the 10-year strategy and spending review next year.” 

Investment must come with reform, the NHS Confederation recognised, noting that in the meantime, the funding announced in the budget has a lot to cover.

The budget will need to spread across agreed pay deals for NHS staff, meet growing demand, recover performance against key targets and transform the way local services are delivered, Taylor shared.

“There will also be some big challenges across mental health and community services, primary care in particular, especially as we approach winter,” he added.

It is hoped that the Government will use next year’s spending review and 10-year strategy to continue increasing capital investment and revenue spending to provide the NHS with the “long-term financial stability it needs going forwards,” Taylor said.