SMEs have called for the government to prioritise easing employee tax and cost burdens at the Autumn Budget later this month, with the majority saying that they had been impacted by rising taxes and costs since the last budget.

According to the new survey of 1,000 SME leaders and decision makers by Paragon Bank, 42 per cent of respondents said that they feel the government should prioritise employee tax and costs in the upcoming budget.

Other policy areas that SMEs say the Chancellor should address next week include business tax reform (cited by 36 per cent), business rates (35 per cent) and incentives for innovation and investment (30 per cent). 27 per cent, meanwhile, were looking for the government to focus on skills and training, while 26 per cent prioritised access to finance.

Reflecting on rising tax and cost pressures, 73 per cent of SMEs said they had been impacted by the Employer National Insurance Contributions (NICs) increase in the previous budget. 69 per cent said they had been hit by the corporation tax rise, 64 per cent by the national minimum wage increase and 59 per cent by the increase in Capital Gains Tax.

47 per cent of respondents cited rising operational costs as the biggest challenge currently facing their business, followed by employment costs (cited by 36 per cent) and access to finance (29 per cent).

Despite the major financial challenges facing many UK SMEs, the survey also found that 45 per cent felt that the government’s support for SMEs during its first year had been “good”, while 61 per cent felt “very” or “somewhat” confident that the government understands the sector’s needs.

65 per cent, meanwhile, said they feel optimistic about the prospects of their own business over the coming year, although just 47 per cent said they felt optimistic about the prospects of the UK economy as a whole.

Phil Hughes, Deputy Managing Director of Paragon SME Lending, commented: “SMEs are the backbone of UK business and when they fail, the economy fails. This latest research reveals their clear message to government: adding more cost and taxation will only hinder growth and innovation.”

“As a lender working with 16,000 SMEs at the coalface – from manufacturers and farmers to construction companies and hauliers – we see firsthand the headwinds they face, and whilst they remain adaptable, ongoing Budget uncertainty only intensifies an already challenging operating environment.”

Hughes added that, while SMEs currently appear to have “somewhat favourable” sentiment towards the government, policymakers shouldn’t take this for granted. He continued: “To earn long-term confidence the chancellor urgently needs to give SMEs clarity on how the government is going to kickstart this promised growth and ease the burden of increasing operational costs.”