The fate of small businesses was very much on the agenda for George Osborne when he announced his Autumn Statement on Wednesday. In what most commentators deemed to be a highly political speech outlining the Government’s economic plans for the country, the Chancellor revealed a significant package for the UK’s community of SMEs. So, what exactly have our political masters drawn up for enterprises in the hope of winning the small business vote in next year’s General Election?
Making big banks share SME data
We’ve discussed before the Government’s proposal this summer to make the large banking providers share information about their small business customers with alternative lenders if the banks aren’t prepared to lend them money themselves. On Wednesday, Osborne revealed the specific banks that will be required to share this data with smaller lenders via credit reference agencies. They are:
- The Royal Bank of Scotland
- Lloyds Banking Group
- Clydesdale and Yorkshire Banks
- Bank of Ireland
- Allied Irish Bank
- Danske Bank
It’s good news for alternative finance providers like us here at Boost Capital, and even better news for the small firms that will be put in touch with funders who really want to help them, and aid them to grow. The Chancellor also made further commitments to establish a UK-wide credit register, something our director of business development, Norman Carson, has called for in the past to give all lenders valuable information about companies’ financial health. The Government will decide whether it may need to legislate in order to bring this about. And there was another boost for the alternative finance industry more broadly, with the decision to extend tax relief for peer-to-peer lending platforms, as well as a loosening of regulations that currently restrict this area of innovation.
Business rates review
A major plank of the Government’s plan for SMEs was a review of the current system of business rates. This tax on businesses’ premises is unpopular with companies, and business groups suggest it should be radically reformed or even scrapped altogether. The Federation of Small Businesses has pointed out that business rates have increased disproportionately over the years, and too few firms qualify for any relief. The Chancellor’s statement proposed the following changes to the current system:
- A thorough review of the current system to investigate how bills may be made clearer, information could be shared more effectively, and the appeal process might be made more efficient. The results of the review will be announced by the time of the Budget in 2016.
- Small Business Rates Relief will be extended until April 2016, potentially seeing a further 190,000 firms exempted from paying much of the tax – on top of the 385,000 that pay no rates at all.
- The Government will cap the Retail Price Index (RPI) increase on business rates at two per cent until April 2016.
- The business rates discount of £1,000 for shops, pubs, cafes, and restaurants with a rateable value of £50,000 or below will be increased to £1,500 for the financial year of 2015 to 2016. This should help up to 300,000 firms.
More money for SMEs
A welcome aspect of the speech was the announcement that a further £500 million worth of bank lending will be made available for small firms by giving extra funding to the Enterprise Finance Guarantee (EFG) scheme. This initiative allows small companies that lack sufficient security to qualify for a commercial bank loan to get bank borrowing by the Government guaranteeing up to 75 per cent of the loan value. However, the scheme has its critics who point out that different banks take varying approaches to loan applications through the EFG, and most interpret the scheme’s rules in differing and confusing ways.
There was also an extra £400 million put towards the British Business Bank, which uses Government guarantees to allow lenders to give more SMEs access to borrowing. The money is specifically for the bank’s Enterprise Capital Funds, venture capital funds that invest in small and medium firms.
The Funding for Lending scheme (FLS) will also be extended until January 29, 2016. This initiative is designed to increase bank lending by allowing commercial banks to borrow Bank of England funds cheaply in order to be able to pass them on to firms. The Treasury claims that almost £48 billion worth of funding has been freed up by the FLS for lenders to support Britain’s businesses.
Extra support for R&D, apprentices, manufacturers, and exporters
Businesses that engage in research and development (R&D) could see their tax bills reduced or could even receive a cash sum as a result of a 230 per cent increase in R&D tax credits from April 1 next year. New guidance on the tax relief will also be drawn up, and a consultation into the issues faced by smaller companies that claim the credits will be undertaken in January.
Another boost for SMEs was the revelation that employers will no longer have to pay National Insurance on the apprentices they hire. And smaller manufacturers could also benefit from £61 million worth of funding that will go towards High Value Manufacturing Catapult centres that provide technical support for small and medium firms.
About £45 million will be provided overall to encourage more businesses to export. First-time exporters will be supported through a £20 million pledge which will fund dedicated international trade advisors through UK Trade and Investment who will guide new exporters through the hazards of doing business overseas. SMEs will be particularly helped to start trading via the internet. Plus, the Foreign and Commonwealth Office will channel £25 million towards a new Surge for Growth programme, supporting trade agreements across the world. All of these efforts should help more British small firms to spread their wings, and start tapping into lucrative foreign markets.
Cash help for faster broadband, and making bank switching easier
We talked about the Government’s broadband voucher scheme on this blog recently, a drive to get more small and medium-sized enterprises in 22 major UK cities installed with the fastest broadband available. Firms can get up to £3,000 to help with the costs of upgrading their digital infrastructure, and Osborne announced in his statement that a further £40 million will go into this push. Plus, the scheme will be extended until March 2016 to give many more businesses a chance to improve their internet speeds and connections. More northern cities will also be brought into the initiative.
The Chancellor outlined plans to upgrade the Current Account Switching Service to include 99 per cent of SMEs, and to extend the redirection service to 36 months in order to give customers more assurance that payments won’t go astray in the changeover. Again, we investigated SMEs’ attitudes towards switching bank accounts recently, and found that too few are prepared to make the jump even when they’re unhappy with the service they receive. Osborne said that there will also be an investigation into whether reducing the switching time to five days would be a useful move for consumers.
So, all in all, this week’s announcement had quite a few things that could be good for Britain’s small firms. But whether it proves to be enough to persuade business owners to vote for the Conservatives next May will have to be seen.