Matthew Knight, Chief Freelance Officer at The Independency Co., is advocating for freelancers in the face of Labour Party tax disincentives
Small business owners are expressing their discontent over their exclusion from Chancellor of the Exchequer Rachel Reeves’ December glitzy drinks party for scale-ups. Here we share their viewpoints and how the Labour Party’s tax policies seem to be doing more harm than good for economic growth.
“While the Chancellor threw a party at No.10, business owners are doing the Budget maths and realising they’ve been mugged. Again,” one business owner told the Newspage agency.
Another said in a separate news report, “It will be felt by entrepreneurs as a kick in the teeth… it takes guts to set up a small business and cash-flow can be uneven and profits uncertain, especially in the current environment.”
These remarks follow the Chancellor’s recent fiscal announcements and encapsulate the mood of millions of small business owners across the UK. While the doors of 10 Downing Street swung open for a select group of high-growth tech founders, a much larger demographic—representing over 4.2 million voters and the backbone of the British economy—found themselves looking in from the cold.
A tale of two economies
The divide was thrown into focus last week as Chancellor Rachel Reeves hosted a glitzy reception at Number 10 to “kickstart Britain’s new scale-up surge.”
The event, celebrating the government’s modern Industrial Strategy, welcomed the founders of “unicorn” success stories like the meal-replacement firm Huel, savings app Moneybox, and data analytics company Quantexa.
Huel, for example, has expanded its operations outside the UK to Germany and the US, creating jobs in multiple markets. But with expansion can come challenges. According to legal news reports in October, Huel is in a legal battle over a proposed customer class action suit against the company for reported claims that its vegan protein powder contains lead and cadmium (Law360).
The government report said the event was designed to celebrate a “bold new plan to back homegrown founders.” Addressing the room, Rachel Reeves declared:
This government backs our entrepreneurs. That’s why we’re overhauling the rulebook – modernising tax incentives, unlocking billions in investment and making it easier for founders to hire, build and grow. Because when British businesses thrive, so does our economy.
The Chancellor was joined by her Entrepreneurship Adviser, Alex Depledge MBE, who praised the government’s focus on high-growth potential:
“We don’t need handouts; we need a system that backs the people willing to take risks. This Budget is a real step-change… clearing the obstacles that stop scale-ups from reaching their full potential.”
Small business owners were left “nonplussed”
However, outside the refined air of the Downing Street reception, the reaction from the wider business community has been far less celebratory. A Newspage report said the majority of business owners have been left nonplussed by No.10’s scale-up celebrations, highlighting the growing disconnect between the government’s “scale-up” rhetoric and the reality faced by the UK’s millions of solo self-employed and micro-business owners.
For these smaller players, who do not fit the “high-tech, high-growth” profile of a Silicon Valley-style startup, the government’s recent moves have felt less like a “surge” and more like a squeeze. The exclusion from the narrative of “growth” has stung many who feel they are carrying the heaviest burden of the recent Budget.
Critics point out that while the government rolls out the red carpet for “scale-ups” (companies increasing revenue or employees by 20% annually), the vast majority of British businesses are fighting for survival against rising costs.
The recent Budget delivered what some have called a “heavy burden,” with hikes in Employer National Insurance contributions and changes to Capital Gains Tax (CGT) leaving many feeling targeted rather than supported.
Jill Poet, CEO at the Organisation for Responsible Businesses, said the government claiming it is backing entrepreneurs simply isn’t true.
She said:
This bells and whistles announcement is aimed only at high-growth scale-ups. Someone ought to remind Rachel Reeves and her government what the definition of an entrepreneur is. In simple terms, anyone who takes the risk of setting up their own business where they would be bearing most of the risks and enjoying most of the rewards, if they are any.
Currently, 75% of private businesses in the UK have no employees. That is over 4 million businesses. Another million+ private businesses in the UK, a further 20%, have 1 to 9 employees. Yes. That is correct. 95% of businesses in the UK, according to the Government’s own figures, are tiny.
“Some of them will prove to be high-growth, but only a small percentage. Yet these tiny businesses deliver 20% of UK turnover. What support has this government offered these tiny, yet mighty, businesses? None whatsoever. Perhaps Rachel needs a lesson on entrepreneurship.
The 4 million “invisible” business owners
The frustration is palpable among the solo self-employed sector—a voting bloc of more than 4 million people. Historically, the engine of UK employment, this group often feels invisible to policymakers obsessed with finding the next tech giant.
Reaction from the small business community has been fierce. Fred Hicks, head of policy at IPSE, expressed in another report that the freezing of tax thresholds and dividend tax increases have put “loads yet more pressure onto company owners and risks disincentivising entrepreneurship when we need it most.”
Another report described the post-Budget mood as leaving business leaders “crying in frustration,” noting that while the Chancellor wants to assist scale-ups, other measures have “cut tax relief” and increased the strain on the very ecosystem she claims to champion.
Matthew Knight, Chief Freelance Officer at The Independency Co., told Newspage the Chancellor cannot justifiably claim to be supporting entrepreneurs.
He said:
The Chancellor saying she’s backing Britain’s entrepreneurs while simultaneously stripping away the tax provisions that help small businesses survive is contradictory.
“If the government’s industrial strategy genuinely relies on homegrown entrepreneurs to drive growth, policy needs to match the promise.
“We need a landscape that reduces risk and helps new and small businesses avoid tax traps and heavier administrative burdens. And one that offers support regardless of business type — not only those that export, employ or are already looking to scale.
“Most importantly, it must recognise the risks entrepreneurs take on, rather than taxing them as if they were employees.
The “scale-up” disconnect
The government argues that its strategy to double eligibility for the Enterprise Management Incentive (EMI) and boost the Enterprise Investment Scheme (EIS) will eventually trickle down benefits to the wider economy.
Tom Leathes, CEO and Co-Founder of Motorway.com, responded to the changes:
The changes to the EMI scheme will make a huge difference. When Motorway hit 250 employees, we suddenly couldn’t offer new joiners the same equity opportunity as our early team. These reforms fix that. Extending option lifespans to 15 years and doubling the employee cap gives UK scale-ups far more firepower to compete for world-class talent much longer into the journey.
But for the local cafe owner, the IT contractor, freelance graphic designer, or the solo tradesperson, these high-level financial instruments offer little comfort against immediate cash-flow crises and rising tax bills. As the government toasts the small number of “unicorns,” the millions of “workhorses” of the economy are asking a simple, uncomfortable question: Where is our party?
