Along with the rest of us, Chancellor George Osborne will, no doubt, find a couple of economic indicators heartening as he fine-tunes his first Budget of the new Parliament.
The UK economy is expanding faster than the Eurozone and unemployment here is half the rate from within the currency union.
Encouraging though that news is, however, UK growth has dropped to its lowest level for three years, slowing over the course of the first half of 2015 from 0.6 to 0.3 per cent.
For all enterprises, but particularly the SME sector, these contradictions will only reinforce the impression that the economic recovery is still patchy and that we still need robust and business-friendly policy-making.
The UK’s small and medium sized businesses have a combined turnover of £3,300 billion, according to the Federation of Small Businesses. They employ 24.3 million people, over 80% of the workforce. So the argument that we need a level playing field with bigger businesses is hard to ignore.
So what are the measures that small businesses might welcome?
Simplifying taxation always appears high up on any business wish list. In his March Budget, the Chancellor announced the end of the self-assessment regime and changes to how business rates are levied, but there are many other aspects of the UK’s Byzantine tax system that are ripe for reform. The Institute of Chartered Accountants in England and Wales says the government will have little chance of meeting its target of ten billion pounds worth of cuts in red tape unless it takes the shears to the tax code.
Commentators make a couple of specific recommendations:
The headline rate for corporation tax has been progressively lowered in previous Budgets, in line with Osborne’s aim to make the UK the most competitive environment within the G20 countries. In a survey carried out by YouGov earlier this year, 20% of respondents suggested an exemption for businesses with a turnover lower than £800,000. And George Osborne will be hard pressed to find many business people that would disagree with that position.
Annual Investment Allowance
The AIA, which allows companies to deduct the full value of a qualifying item from profits before tax is levied, is temporarily set at £500,000. Confirming it at that level would provide stability and enable smaller businesses to kick start much-needed investment programmes, says the ICAEW.
Access to finance
Unsurprisingly, access to finance continues to be a compelling issue for smaller businesses. Industry bodies and commentators have applauded the British Business Bank’s Help to Grow initiative but would like to see more open access to finance.
Human capital costs
Reducing the costs of employment is a pressing concern for growth businesses. The ICAEW suggests small businesses should qualify for an exemption from employers national insurance contributions for all apprentices – and not just those under 25 as we will have from April next year – to stimulate employer investment in training.
It also says businesses with fewer than 25 employees should be exempt from the mandatory pension auto enrolment regime, which will impose a totally disproportionate expense on smaller operators.