1. Wage growth is partially market-driven. The NLW floor is pure policy. Salaried AWE growth is macroeconomic. Both are included, but not all wage growth is attributable to government intervention.
2. No counterfactual. The model shows absolute cost levels at three points in time. It does not estimate what costs would have been in the absence of these policies.
3. Energy and financing are primarily market/macro. The 2022 energy crisis was triggered by global events (Russia–Ukraine), not UK domestic policy. BoE rate rises respond to inflation.
4. HR/legal/cyber/SaaS are survey-based estimates. Per-head costs derived from industry surveys (CIPD, FSB, Gartner). Could vary ±30% by sector and firm size.
5. NLW cascade effect. Higher NLW → higher NIC on those workers → higher pension contributions. Each line is calculated independently, but the compounding should be noted.
6. Excludes policy offsets. Full expensing, increased Employment Allowance, R&D tax credits, Small Business Rate Relief, freeport reliefs are NOT in the model.
7. No sector identity. The hypothetical firm blends characteristics (NLW staff suggests hospitality/retail; salaried staff suggests professional services). Per NIESR feedback, cyber, energy, insurance and PT/FT split are particularly sector-specific.
8. Domestic policy costs only — Brexit-related costs excluded. Crucially, this model excludes Brexit-related costs — customs declarations, rules-of-origin compliance, SPS checks, VAT on imports, and lost EU market access — which have been a major and well-documented cost burden on UK firms since 2021. BCC research consistently finds SME exporters are disproportionately impacted by post-Brexit trade barriers. Their exclusion means this model understates the total post-2016 cost burden on a typical SME. Other excluded items: Corporation Tax (profit-dependent), Apprenticeship Levy (below £3m payroll threshold), SSP/SMP/SPP, rent/materials/logistics inflation.
9. Turnover indexing (NIESR methodology). This version uplifts nominal turnover by the GDP deflator (IHYS) so cost growth is compared against a like-for-like revenue baseline. This addresses an asymmetry NIESR identified. Note: this assumes the firm successfully passes through 100% of inflation to prices, which is an upper-bound assumption — UK margins have been squeezed in practice, so the 'true' cost-share rise may sit between the nominal and deflated values.
10. Business behaviour held constant. The model assumes no operational or behavioural changes over time. In practice, businesses respond to rising costs by raising prices, reducing staffing, postponing investment, improving productivity, or restructuring. BCC research has consistently found firms have delayed investment and growth as a result of cost pressures such as employer NICs and business rates.
