There are few cross party political band wagons quite as popular as small business growth. Virtually no one will argue with the idea of helping UK small businesses thrive and deliver more employment to our economy.
With an election coming next May this was a more overtly political Autumn Statement than usual, with the Chancellor hitting banks and other big corporations hard, whilst offering succour to hard-working families looking to buy property. Naturally he also found room to provide new support for small businesses.
One of the constant issues facing this Government has been the net negative flow of finance from banks to small businesses. The Government has tried numerous methods of turning these tables, most notably through the Funding for Lending Scheme, through which banks are provided with cheap capital to lend to businesses. The Chancellor announced an extension to the Funding for Lending scheme yesterday, as well as providing an extra finance to expand the British Business Bank.
Small businesses also received good news on tax, with the Chancellor capping Business Rate rises at 2% (instead of the with inflation rise of 2.3%). Perhaps more importantly a full review of Business Rates was also announced, with the results delivered in the 2016 Budget. A fundamental rethink of Business Rates is long overview, and small businesses, especially those on the High St. can be hopeful of paying less tax following a review.
It was also announced that the Government will abolish National Insurance payments for apprentices under the age of 25, making it significantly cheaper for small businesses to grow their team with young talent. The change will cost the Government £105m in taxes.
One of the biggest barriers to growth in small businesses is the cost of hiring new talent, so it’s good news the Government wants to help here. I think more could be done on this point to encourage small businesses to drive employment growth. A National Insurance holiday on the first 10 employees in companies working in specific target industries (such as tech) would be an expensive measure, but I believe it would pay for itself in the medium term.
Another tax announcement was an increase in the rate of tax relief for research and development within small companies. Additionally the Government is trying to encourage more small businesses to apply for the relief by making the application process much easier.
Also aimed at driving innovation was the announcement of significant further investment in innovation hubs, called ‘catapult centres’.
It can often be hard to focus on innovation whilst running a small business, but innovation can be the key to business success. Anything that encourages small businesses to focus a little more on innovation is good news.
The UK has long been a net importer – buying in more products than we sell outside our borders – and the Government is keen to redress the balance. The Chancellor announced more trade advisers to help small business reach out into new markets, with a specific focus on online export.
One of the main barriers to export cited by business owners is knowledge of other markets, so this move will help, though it is limited in scope. The main barrier to export however is working capital finance. Going into export can be a cash intensive process and so small businesses need to be confident in their cashflow before moving into export markets.