Parliament delivers its verdict on small business – and the picture isn't good

Thirty-eight businesses close every day because of late payment. On high streets, another 38 stores shut their doors daily. Energy bills remain nearly double their 2021 levels. Crime adds 10p to every convenience store transaction.

Business confidence among smaller firms is, in the words of one trade body, as bad as it was during the pandemic.

These are the findings of the Business and Trade Committee's Small Business Strategy report, published on 11 February 2026 and chaired by Liam Byrne MP.

The committee took over 100 written submissions, held four oral evidence sessions and visited high streets across England.

Enterprise Nation submitted evidence at three points. What the committee found should concern every founder in the country.

The cash flow crisis is structural, not cyclical

Late payment is the most immediate threat that smaller firms face.

Currently, UK businesses are owed somewhere between £22.7 billion and £112 billion in unpaid invoices. Forty-four per cent of all invoices are paid late.

In the construction sector, 90-day delays are routine. The Carillion collapse alone led to an estimated 780 small firms down the supply chain becoming insolvent.

The government replaced the Prompt Payment Code with the voluntary Fair Payment Code. The committee found it poorly promoted and widely ignored. One contractor in the construction industry told MPs that not many firms had signed up.

The committee wants 30-day payment terms to become mandatory by the end of this Parliament. Until then, chase your debtors and document everything.

The procurement prize nobody is claiming

The government spent £341 billion buying goods and services in 2023/2024. Only 20% reaches small businesses, a share which has barely changed since 2019.

Raise it to 30% and small firms would receive £22.7 billion more every year. That isn't a marginal gain – it's transformational.

Enterprise Nation argued in its submission to the committee that the answer isn't more departmental targets, but a broader pipeline of SME suppliers built across government as a whole.

The committee agreed, recommending a single 30% cross-government target by 2028, with yearly reporting to Parliament.

If you sell to the public sector, the Procurement Act 2023 reforms and new departmental targets create a real opening worth pursuing now.

Tax is a brake on growth

The VAT threshold sits at £90,000, higher than that of any EU member state.

Estimates say that around 26,000 businesses are deliberately keeping turnover below that figure to avoid the cliff edge of full liability.

For hairdressers, hospitality businesses and beauty salons, the distortion is even sharper. They can't reclaim VAT on wages, which is their biggest cost.

The Making Tax Digital system adds more pressure.

The mandatory requirement to file reports every quarter and adopt third-party software has increased the burden on smaller firms. In fact, some owners told MPs they were considering retiring rather than trying to follow the rules.

Keeping to tax rules currently costs the small business community 242 million hours and nearly £25 billion a year.

If you're a sole trader or landlord earning over £50,000, check your Making Tax Digital obligations now. (Read these guides for sole traders and landlords.) The first deadline is April 2026.

Employment costs are hitting breaking point

The 2024 Autumn Budget's increases to National Insurance contributions and the minimum wage added £25,000 to average yearly costs for hair and beauty businesses.

UKHospitality reported 69,000 job losses in the sector, three times the rate in the wider economy.

One café owner told the committee she'd need to sell 400 extra croissants a month just to break even, against falling revenue and declining footfall.

The committee's call is clear – future policy changes must come with SME impact assessments that model cumulative effects before implementation, not after.

Energy bills and crime are taking what's left

Policy levies now account for up to 65% of an SME's typical energy bill, projected to reach 75% by 2030.

Government support schemes are almost entirely directed at large industrial users. The committee wants dedicated relief for everyone excluded from those schemes.

On crime, retailers spent a record £1.8 billion on prevention in 2024. Installing CCTV to protect staff then increases a premises' rateable value and pushes up the business rates bill.

What the committee is asking government to do

One sentence covers it – put small business cash flow, costs and survival at the centre of decision-making, rather than treating them as an afterthought.

Enterprise Nation submitted evidence on procurement reform, training access through trusted channels and the case for regional Small Business Boards. You can read the committee's full report here. We'll keep pressing on all three.

People also read

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• Supplier payment transparency: Why SMEs must think and act now

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