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Budget 2013: Mixed messages for SMEs

Nia Williams

March 20, 2013

This is the opinion of Xenios Thrasyvoulou, founder of online freelancer marketplace PeoplePerHour and a small business owner.

Commenting on today’s Budget, he said: “The Chancellor said at the start of his speech that this would be a Budget for people who aspire to start their own businesses. Does the Chancellor have a short memory?

“Apart from a £2,000 cut in employers NIC and corporation tax being cut again to 20% in 2015 there wasn’t much else to give aspiring small business owners any confidence that the government has their best interests at heart.

“For starters, how is the government going to tackle the problems with the stuttering Funding for Lending Scheme, and what plans does it have for FLS beyond 2014?

“And there was no mention of extending money available through the StartUps Loan scheme to help people who are struggling to access finance to start a business.

“In the face of a triple dip recession, the shortage of credit for small businesses needs to be addressed as a matter of urgency to help rouse the UK economy from its torpor.

“Only 3% of small businesses we work with have managed to secure a bank or building society loan for start-up capital and this needs to be recognised if the Chancellor really does want to help UK entrepreneurs.”

Yet business lobby group the Forum of Private Business gave George Osborne an overall thumbs-up for his Budget.

The not-for-profit employer support organisation welcomed much of what was in the Chancellor’s speech with the only immediate criticism his inaction on business rates.

But it said the Employment Allowance, worth £2,000 to all businesses with employees, was a real boon for smaller UK businesses.

“We’ve been calling for a scheme like this for a number of years now so our only disappointment with this is that it’s 12 months away and that’s a mighty long way off,” said the Forum’s head of policy, Alex Jackman.

“While business will love the concept, the fact that no financial benefits will be felt until April 2014 somewhat takes the shine off it. Still, it will allow for businesses to prepare and plan ahead.

“The bottom line here though is that this initiative will have a double function – to either incentivise employers to take on more staff or to take the saving and boost their profitability. For many small firms who’ve been operating on extremely small margins the latter would be welcome relief.

“For businesses looking to grow though it means they’ll be able to employ an additional employee earning £22,400, or an additional four employees working full time on the adult minimum wage, without any increase in their employer NICs. That’s got to be good for employment figures and therefore the wider economy.”

Jackman also welcomed the growth vouchers concept but said this was not nearly well funded enough.

“It’s a recognised fact that expert advice on key business processes and issues can significantly improve business performance – small firms who take advice are much more likely to survive,” he said.

“Growth vouchers will help if it enables SMEs to do this. £30 million may seem a small amount but we are already working with government on this project to see how best their investment can be used.”

The Forum was however critical of the Chancellor’s inaction on business rates which, it said, would have been a blow to many SMEs hoping for at least a freeze.

“Ask any small businesses what they wanted to see from this Budget and many will have said: ‘action on business rates’,” added Jackman. “We said before the Budget government couldn’t keep clobbering businesses with hike after hike, and unfortunately we haven’t seen that sentiment acknowledged today by Mr Osborne.

“It was really a case of ‘enough already’ years ago and April’s increase which now goes ahead as planned will mean rates have spiralled by a mammoth 13% in just three years. There aren’t many businesses which have seen income increase by anything close to that figure with sluggish growth and recession to contend with in the same period.

“Business rates have risen so much in just a few years they are the number one enemy to many small firms, and we believe they are a big part of the problem with our high streets too. It’s disappointing to see no action here – it was the obvious way to relieve pressure and is a missed chance for quick relief for business.”

On fuel duty Jackman added: “The Chancellor was absolutely spot on with this. No one wants to see fuel prices any higher than they are and small businesses will welcome that. Let’s not forget though that prices are fast approaching record highs – any increase would have been reckless so this was just basic common sense.”

Summing up the Budget, Jackman said: “There was enough in the Chancellor’s speech to keep business happy – for now anyway. But it’s just a sticking plaster if growth doesn’t really kick in for another year.

“Pressures for cost reduction will keep piling up until the economy sees some real growth. While we welcome the measures in here for short-term help, longer-term worries remain, and unfortunately once again a lot will rely on what happens in Europe and beyond in 2013.”


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