Reeves’ tax plans could drive one in eight UK businesses overseas

One in eight UK small and medium-sized enterprise (SME) leaders are planning to relocate themselves, their companies, or both overseas, citing rising taxes and mounting regulatory costs, according to a new report by Rathbones.

The research, released just weeks before Chancellor Rachel Reeves delivers her Autumn Budget, paints a bleak picture of business confidence across the UK’s private sector.

If realised, the potential exodus could involve around 680,000 firms out of the UK’s 5.67 million SMEs — a prospect that analysts warn would hit jobs, tax revenues, and economic growth.

Among SME leaders planning to leave, one-third are considering moving their businesses abroad, with Ireland, Dubai, and the US emerging as the most popular destinations.

Another 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 well beyond taxation, with two-thirds of SMEs believing that the government is not doing enough to encourage business growth and more than 40 per cent say current policies are actively unsupportive of enterprise.

Rathbones said many respondents pointed to higher employers’ National Insurance 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 because of taxation is deeply concerning,” 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 boost growth.”

The findings come as several business groups sound the alarm over the impact of government policy on smaller firms. The British Chambers of Commerce has reported that small exporters are struggling under post-Brexit trade rules, while insolvency specialists Begbies Traynor recently recorded a sharp rise in SMEs facing critical financial distress, particularly in consumer-facing industries.

Many small firms are also bracing for potential changes in income tax, capital gains tax, and business rates in Reeves’ upcoming Budget, following last year’s increases in employers’ National Insurance 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 persistent fiscal pressure on small firms could choke investment, stall hiring, and weaken long-term economic growth.

“The government needs to offer more targeted support for SMEs, whether through tax relief or policies that incentivise growth and risk-taking,” Babatunde added.

“Otherwise, we risk seeing a significant exodus of talent and businesses at a time when the economy can least afford it.”

The warning adds to growing pressure on Reeves to reassure business leaders that her fiscal plans will not further burden small enterprises. With signs of rising unemployment and slowing private investment, economists say the Autumn Budget could be pivotal in determining whether the UK remains a competitive base for entrepreneurs.

Analysts expect Reeves to focus on closing the tax gap and raising new revenue streams, but business groups have urged the Treasury to avoid blunt tax hikes that could deepen economic stagnation.

As one industry leader put it: “Britain cannot tax its way to growth — it needs to back the very people creating it.”

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Reeves’ tax plans could drive one in eight UK businesses overseas