Small Business Matters

Small businesses welcome support

Yesterday Chancellor Alistair Darling announced the pre-Budget report 2009, the results are available on the HM Treasury website. Overall the measures were positive and encouraging for small businesses. The focus was on freeing up cash and providing access to credit, which is exactly what small businesses need right now.

Below are the key outcomes that will impact small businesses.

1. The Enterprise Finance Guarantee scheme has been extended by six months to September 2010. This scheme guarantees 75% of loans to small businesses with a turnover of £25m or less, allowing start-ups to get moving while established small businesses can consider expanding and investing. So far this scheme has already supported 6,500 firms with offers of loans totalling £660m.

2. The time to pay scheme which allows small companies to spread tax payments over a longer period of time has been extended indefinitely. This scheme has been helpful for businesses trying to free up cash in the past year. 150,000 businesses have already deferred £4bn of tax in the past year as a result of the scheme and this extension now allows further small businesses to take up this opportunity and invest the available cash in new projects.

Today’s Pre-Budget report

Chancellor Alistair Darling will give his Pre-Budget Report (PBR) speech at 12:30pm today. You can follow all the latest PBR news on the HM Treasury website.

This could be Darling’s last chance to revive the struggling UK economy - it will be interesting to hear what he will propose and understand what the implications will be on UK small businesses.

We for one hope that there is some good news in store for small businesses including accessibility to much needed funding and recognition of the challenges the VAT rate change creates. Let us know your thoughts and what you hope to hear in today’s speech.

Video: Impact of UK Budget 2009 on small businesses

Diana Flier, Compliance Analyst at Intuit UK, discusses the recent UK Budget announcement and its impact on Small Business Britain.

Diana responds to these questions:

* What is the significance of the Budget to small businesses?

* What pain-points did the Budget need to address?

* What measures did the Budget include that will help small businesses?

* Were there any measures which will have a negative impact?

* What was missing from the Budget?

* So how did the Budget fare overall in terms of meeting expectations?

Budget fails to raise small businesses’ hopes of surviving the recession

According to our latest survey, less than 2% of small businesses said that Darling’s Budget would have a positive impact on their business, while 87% said they were now less likely to vote for this Government at the next general election.

Our research highlights the discontent among Small Business Britain as a result of the Government’s lack of support. A staggering 91% of respondents said the Budget would have no impact on their chances of surviving the recession, contradicting the Chancellor’s remarks that this Budget would help ease the country out of the economic downturn. This could have a devastating effect on Britain, as small businesses play an integral role in the economy, employing an estimated 13.5 million people.

While the Government claimed that the Budget has addressed small business cash flow issues, 90% of respondents disagreed, highlighting the extent to which the biggest challenge facing businesses in the downturn has been ignored.

More reaction to the budget from small businesses...

David Anderson, Living Leaves in Hampshire:

"The Budget is an unhappy picture all round. The Chancellor started off the Budget by saying that it will help stimulate demand in the economy but the measures announced will have little impact on demand. If anything, the 2% increase on alcohol and tobacco duty will dampen demand as it will affect people’s disposable income. The increase in fuel duty tax will place an extra cost on our business as the price of materials being shipped in will rise, while reversing the VAT reduction back to 17.5% will be a further disruption and cost. At the same time, there seems to be nothing in the Budget that will offset these additional costs for small businesses so what help is the government providing? 

Budget Response from Small Business Owner

Nigel Venner, owner of Castle of Comfort Country House and Restaurant in Bridgwater:

"The 2% increase in alcohol duty will have a significant impact on our business, and our restaurant specifically. Margins will be lower when selling alcohol unless we increase prices but in the current climate when it is difficult enough to get customers through the door, we can’t see how we can do that.

"The VAT returning to 17.5 % after December will also place a huge administrative cost on us. Our systems are still getting used to the original cut, so reversing it all back will be a major headache and detrimental to the business.

Budget 2009 - The Good, the Bad and the Missing...

The Good

• Main capital allowance: Cash flow is the number one priority for small businesses in a recession. Therefore, the doubling of main capital allowance to 40% from April 2009 is positive news, particularly for those investing in new plant and machinery. 

• Loss carry back: An extension of the three-year carry back, meaning loss-making businesses can reclaim taxes on profits made in the last three years. It will help lots of businesses, but it was expected and is simply an extension of an existing measure.

• Traineeships: A £260m investment in training for persons under 25 who have been unemployed for over a year. This is good news, as any help with recruitment costs will provide relief for businesses.

• Business Payment Support Service: This tax helpline is a great relief to small business. However, now the recession is really being felt, it was essential that it was extended but this may be storing up problems for the future as taxes must be paid at some point.

• Top up trade credit insurance: Any help to reduce the risk of debts is good news. 

• Vehicle scrappage scheme: Consumers will get a £2,000 discount when trading in old vehicles. This is good news for the many thousands of small businesses in the automotive industry. However, it is too short in duration as the scheme only goes up to March 2010 and a more long-term solution is called for.

• Business rates: The spread of uplift is a positive move for small businesses.

• VAT threshold increased: While the extension of the reduction didn’t happen, the raising of the threshold to £68,000 at least means that many small businesses will fall outside the VAT bracket.

 

Intuit analysis: there is very little that is new here, some of which the Government had little or no option to implement. Initial feedback from our small business customers is that these measures will have no positive impact on them.

Budget commentary - A bad day for the high earners?

Many entrepreneurs may be asking themselves why it was that they set up in business. Was it the long hours, or the joy of the masses of paperwork to deal with? Was it to face the daily challenges of keeping the ship afloat during many difficult times? Was it to ensure that the banks received a healthy payment for their very reasonable back charges? Maybe it was so that they could provide employment and increase the tax take of the government through PAYE and National Insurance. Or maybe it was so that they could be successful and enjoy the fruits of their success through modest rewards. Whilst there are very few lucky directors of small businesses who earn over £150,000, it is the opportunity to earn which stimulates and motivates entrepreneurs to set up in business and succeed.

If the government is intent to take nearly 60 per cent in tax and national insurance when you do succeed, then why bother?

Mark Wordley, ASUK Accountants and Intuit UK ProAdvisor

Budget live commentary - Round up

As the dust settles, Small Business Britain is almost certainly split between those who are feeling generally disappointed and those shopkeepers who are trying to figure out how to increase all their cigarette and alcohol prices by two percent over the next few hours – in today’s tough economic climate, simply swallowing the cost is not an option. All but one of the major things the small businesses told us through our survey that they were looking for simply weren’t there. No reduction of employers’ National Insurance contribution rate. No tighter government control over bank charges. No further measures to ensure late payments are reduced. No extension of VAT reduction to 15 per cent for a further 12 months. Only a further deferment of the rate increase of corporation tax was included. Thanks Mr Darling, but not for much.

Budget live commentary - Helping connect the nation

Whether the Government intends it or not, the commitment to improve Broadband Britain is great news for the many tens of thousands of small businesses that currently struggle to compete due to nothing more significant than where they are based. Having better broadband connectivity is great news for small businesses that can embrace online technology more completely within their business both in how they communicate with customers but also how they can use online technology to manage their finances.