What Does The Budget Mean For Small Business?
Small and medium sized enterprises (SME’s) are the backbone of the UK economy – SME’s are usually defined as those businesses employing less than 250 people.
To give you an idea of the SME sector, there are now over 5.5 million private sector businesses in the UK of which 99% are SME’s – that compares with approximately 4.5 million SME’s back in 2010.
The combined annual turnover of SME’s last year was £1.8 trillion, and SME’s employ a total of 15.7 million people.
So, clearly an important contributor to the UK economy.
Last March’s Budget, was seen an as attack on small firms and the self-employed.
So, this budget was seen as an opportunity for the Chancellor, Philip Hammond to win them back.
The statistics above are clear evidence that SME’s are crucial to the UK economy and arguably never more so than now as the UK prepares itself for life outside the European Union.
So, when it came to the small business sector, did the Chancellor do enough?
Emma Jones, the founder of small business support group Enterprise Nation, said: “This was a solid budget with a strong emphasis on industrial strategy, technology and research & development – and getting the UK into good shape for Brexit and beyond.”
“This is what we’ve been saying for a while should be the role of Government when it comes to enterprise creation and support; build the right environment and conditions for businesses to prosper and thrive, and then let businesses do what they do best.”
Let’s look at some of the key points.
The Chancellor delivered some good news on this front.
He indicated that the turnover threshold below which firms don’t need to register for VAT will remain at £85,000 until at least 2020. It remains one of the highest thresholds in the world, and for instance dwarfs the EU average of £20,000.
There had been concerns that the Chancellor would listen to some recommendations being made to reduce the threshold and potentially bring in as many as 1.5 million more small businesses into the VAT system.
Mike Cherry, chairman of the Federation of Small Businesses, said: It was good to see the Chancellor’s speech acknowledge our concerns about the VAT threshold.”
“Dragging thousands of more small firms into the hugely complex VAT regime would have caused a significant drag on output at an already challenging time for small business.”
A call to link business rates to the CPI inflation index rather than the RPI index of inflation was listened too.
And the decision was also brought forward to 2018 – two years earlier than originally planned.
Mr Hammond said this move was worth £2.3 billion to businesses over the next five years.
The Chancellor also announced measures to end the so called “staircase tax” with a pledge to reinstate original business rate bills and backdate the move. This is estimated to have an impact on businesses in up to 80,000 properties.
Research and development
Young enterprises involved in the research and development space are among the biggest winners following the Autumn Budget
The government has indicated it will ring fence an extra £2.3billion of its funds for investment in research and development.
It has also upped the main tax credit for young firms operating in the space
The British Business Bank
One measure that the Chancellor didn’t mention in his speech, but was nevertheless included in the Budget document, was the Government’s continued support for businesses with the extension of the British Business Bank’s Enterprise Finance Guarantee scheme until March 2022
The Enterprise Finance Guarantee (EFG) is a guarantee scheme to facilitate lending to viable businesses that have been turned down for a loan or other form of debt finance due to inadequate security or a proven track record.
It can be an important support for a businesses looking to raise finance to grow and expand so extending the scheme to 2022 was viewed as welcome news.
If you want to find out more about the EFG scheme, go here for more information:
So, there’s some of the headlines – the key points affecting the SME sector in particular.
As always, the devil will be in the detail, but compared with the Chancellor’s last budget, this one felt like a support for small businesses.
As we all face the spectre of Brexit, and what the landscape for the SME sector will look like post-Brexit, small businesses in particular will need the help and support of Government.