Spring Forecast 2026 - Episode one: what SMEs need to know

In this episode, Mark Morton explores the key themes shaping the upcoming Spring Forecast on 3 March 2026. From SME lending packages and tax policy shifts to the latest developments affecting defence spending, welfare reform, and the hospitality sector, Mark unpacks what businesses should be preparing for in the months ahead.

For digital resources including our 2026 Tax Cards, visit:
https://www.mercia-group.com/marketing/spring-forecast-statement-2026/

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Transcript

Hello everybody, it's Mark Morton here. Welcome to this most recent podcast last week of January, and I'm looking out the window here and you're being battered by yet another storm. The government have made an announcement. In this week actually, regarding financing businesses now it interests me because we're in the run up to the spring statement. 

And I was mulling over recently and just having a look back at what the government has said in the previous spring statement in now again. The spring statement and the government last year pretty much stuck to this. The spring statement is supposed to be a purely sort of economic stroke fiscal statement. 

So the government have tried to say that there will not be major tax announcements. Within the spring statement, stroke spring forecast last year, they pretty much managed that. It will be remain to be seen whether events sort of shake them out of that cycle, but. Taxation's only one side of the coin, as we all know. 

The other is public spending the economy, et cetera. And if you go back a year just having a quick look the main sort of policy areas were increase defense spending. So that is a long-term project. If you look at what's gone on about Greenland, et cetera, without getting into heavily into politics, quite a lot of this seems to have been from the American president actually trying to twist the arms of the European nations and NATO members to spend more. 

But obviously that's a long term. Project up to 5% of GDP. We're sort of, not quite at two and a half percent yet. And the question remains, how are you gonna fund that, obviously? And not being an economist, my simple mind says you either raised tax or you reduce expenditure. And if you go back to the last spring forecast. 

The other two big areas which the government passed comment on. And of course this is one side of that coin, were cuts to the welfare state amounting to 5 billion pounds or broadly 5 billion. And cuts to the civil service. Now, a, both of those are longer term projects, but of course what we found in the last year was particularly in terms of welfare spending. 

The government could not convince its own members of parliament to follow that through. And rather than 5 billion, we ended up with about 2 billion of cuts. So the response by the government seems to have been to increase taxation accordingly, and we saw that in the last budget. Now, fast forwarding to where we are now, and this is what sort of really rang some bells, the announcement this week by the government is to free up. 

11 billion of lending packages to SU support, to support SMEs. And when you read the press relief from the government, it says this money will help firms invest higher and expand, et cetera, et cetera. Now the interesting with that is you seem to be saying, actually, we will raise taxation for SMEs. 

But then to help them, we will allow them to borrow more. Now, as a man who was brought up in a very old fashioned way and taught not to borrow, you know, don't spend unless you've got it, you almost seem to be saying to a lot of SMEs, we've increased your taxation package tremendously with national minimum wage increases with national insurance increases. 

Interestingly, I was just reading the draft legislation to do with salary sacrifice and of course to probably bigger businesses that's gonna make a really big sort of national insurance dent in their pocket in 29. But on the flip side, will allow you to borrow more. Now as a prudent business with uncertainty in the world, I may not want to borrow more. 

And my feeling for businesses at the moment is they are not looking to hire. Particularly new people. Not even replace people that leave, you know, and that is how they're cutting their cloth accordingly. And particularly those bigger firms, they will already be looking forward to 2029 and saying we've got a, you know, a really big hit with national insurance coming again, and therefore we will cut our cloth accordingly in the intervening years. 

We will plan for that now. You know, there seems to be a bit of a contrary message. On the one hand, we will tax SMEs more. We will tax people with property more. We will tax people with dividend income more and so on. And on the other hand, Arbit will allow you to borrow more. You know, to help your business. 

So I don't wanna denigrate that announcement, but you do start to question, you know, how many businesses will access that money? It is not government money. It seems to be that the government have sat round a table with five big banks NatWest, HSBC, Barclays, Lloyds, and Santander. And to some extent said, please lend SMEs more money. 

Now, of course there will be conditions attached to that and so on and so forth. So yeah, we're starting to get press releases in the lead up to the spring forecast. Obviously, we'll be recovering it in some detail. So I will keep you informed of any further changes. Of course the other thing which has happened in the last sort of short period since Christmas is. 

In this vein, a change for pubs. A particular sector where they've been hurt by a variety of things, but, you know, including national minimum wage and national insurance increases. And we're looking at a very significant rise in business rates because the support that had been put in place for the hospitality industry since COVID ID. 

Was starting to be withdrawn. Now, of course, having announced that it was being withdrawn, IE business rates were gonna go up a lot for hospitality businesses. The government then seems to have turned around and said, oh, sorry pubs. Okay, we'll give you some sort of reduction, stroke subsidy, stroke, whatever it turns out to be. 

But what it will be is not entirely clear. Of course, that though begs the question that the hospitality sector is more than just pubs, and now you're finding hotels knocking on the door, and so on and so forth. And as somebody who stops away with business, it is amazing how much hotel costs have increased since the pandemic, you know, the old days of Lenny Henry and 29 quid a night are long gone. 

And if business rates are gonna go up, that will feed through into prices, which feeds through into inflation, which feeds through into blah, blah, blah, you know, and we end up in a vicious circle. So, yeah, it'll be an interesting spring forecast. The chancellor's second one, we will see what cunning plan there is to stimulate the economy, because at the moment, growth does not seem to be happening, and there doesn't seem to be a big prospect of it happening at the moment. 

 And as fate would have it, having recorded the previous bit of this podcast yesterday, of course, later in the day, the government then did announce a bit more information regarding their support package for pubs. Now what the government seem to be saying is pubs will get a discount, a 15% discount on.

New business rates, bills. Now the new business rates, bills will be higher than the old business rates bills. The government has also said then that will be followed by a, what is called a two year real terms freeze, whatever quite that means. So the detail is a little bit lacking, but the long and short of it is there will be some support from.

Increased business rate bills for pubs, but not for anybody else. Now, of course, that then begs the question that actually the hospitality sector is somewhat broader and we go back to where we were before. Significant rises in business rates for a lot of hotels, for example. And it's quite interesting stopping away with business.

Hotel bills have gone up tremendously since the pandemic. And again, where is this increase in business rates gonna go, a, it's either gonna really hurt that business to the point that it has to shut down, or B, it's gonna be passed down the line to the customer, which I suspect is called inflation. So again a bit of a concession for pubs, but once you conceive to pubs, then you know, it begs the question, what are you gonna do for my business?

What are you gonna do for my business? And it feels a little bit like the saga with farmers and a PR, that actually if you shout loud enough, if you bang the drum long enough concessions will be made. So it'd be interesting to see how the business rate story develops over time, because I suspect ultimately this is not the end of that particular saga anyway.

Strange how coincidence affects the story. And it's a fast moving story.

So anyway, on that happy note. On this dismal sort of, day. Yes, we'll keep you informed. So take care everybody. And yes we'll keep you up to date with the Springs forecast. Thanks very much. Bye.