Cynics have said that it was a Budget designed with a general election in mind. When George Osborne revealed the Government’s financial plans for the country on Wednesday, there were several crowd pleasers among the announcements, particularly for the valuable older vote. Alongside a simplification of pension savings rules to make retirement funds easier to access, taxes on bingo halls were halved, and there was even a freeze on cider and whisky duty for the benefit of those who like a tipple.
But a major focus of the Chancellor’s plans was those he calls the “makers and doers” of Britain. The needs of small and medium businesses – specifically their lack of ready funding to enable growth both in the UK and further afield – was a cornerstone of the speech. And one area that the Budget document highlights as a priority is finding a way to force the banks to refer SMEs to alternative sources of finance when they aren’t prepared to lend them money themselves.
We’re told that a consultation will be launched very shortly into how rules may be devised to pair small firms who’ve been rejected for conventional loans with alternative funders, like us. And an important step towards achieving this is insisting that the banks share information on SMEs’ credit history with alternative finance providers – and that they do so quickly. Thankfully, the Budget suggested that such a move is imminent. It also said that an independent survey into how banks perform for small firms is set to be published in May, detailing what SMEs really think of their banking provider, as well as ranking the individual institutions’ efforts.
Here at Boost Capital, we’re glad that these changes are afoot, not just for our business, but because we hear day after day the frustrations of business owners who work hard, and who have real and credible ambitions to grow their enterprises, but who cannot get the cash to make those ideas and aspirations a reality.
After hearing the Budget announcement, Marc Glazer, Boost Capital’s Chief Executive Officer, commented:
“We welcome the announcement of a consultation to explore how legislation might be developed to match SMEs with alternative lenders when they’ve been rejected for finance elsewhere. This cannot happen soon enough. We speak to and fund businesses every day with enormous potential, but who’ve been unable to access the borrowing they need from their main banking provider.
“The Treasury’s move to develop a route for those businesses to find alternative lending is very encouraging, especially for those – often in sectors without significant assets to leverage – who struggle to meet the stringent lending standards set by high street banks. Alternative lenders who often use different criteria to judge whether to lend to a business offer an important option for UK businesses with strong ambitions to grow.”
Vince Cable, the Secretary of State for Business, Innovation and Skills, put it succinctly when he added: “Being turned down for finance should not mean a small business is turned off from growth.”
We couldn’t agree more. And we were also glad to see many of the other measures announced that have the potential to help the UK’s small business community.
- The annual investment allowance for businesses will be doubled to £500,000 from April 2014 until the end of 2015. It’s estimated that this will benefit up to 99.8 per cent of businesses in the UK, about 4.9 million in total. In practice, this means that firms will receive up to 100 per cent relief up-front on their investment in plant and machinery. Those working in agriculture and manufacturing are expected to be the greatest beneficiaries of the change, with three out of four being outside of London and the South East.
- There was a boost to would-be exporters, as businesses are being offered access to £3 billion-worth of cheap loans through the Export Finance direct lending programme. This is a doubling of the scheme, which was created to help exporting businesses, and interest rates on the export loans will also be cut. Both measures should make British exporters more competitive and put them in a better position to win contracts. Firms that operate in far flung countries could also see some benefit from a reduction in Air Passenger Duty on long haul flights to certain destinations. Plus, UK Trade and Investment (UKTI) is to see the funding for its Global Entrepreneur Programme doubled. This initiative is designed to attract the world’s most talented business people to set up and grow their enterprises in the UK.
- Innovative young companies will be supported further by an increase in the rate of the research and development tax credit payable to early stage small firms that are still loss-making. This will shift upwards from 11 per cent to 14.5 per cent from April.
- The Seed Enterprise Investment Scheme (SEIS), a tax break that helps fund start-up firms, is to be made permanent. This has already helped more than 1,600 businesses raise more than £135 million since April 2012.
- Companies that use a lot of electricity generated from fossil fuels – manufacturers, for example – should see their energy bills drop due to a cap on the Carbon Price Floor. This is designed to encourage the use of low carbon methods and infrastructure, and its rate is being held at £18 from 2016/17 until 2019/20. Along with other measures to cut businesses’ energy costs, this could save British firms £7 billion by 2018/19.
- Smaller businesses operating in the construction sector could win from a move to help them build more homes. Osborne announced a £500 million fund to be made available to aid smaller house builders who own sites that they can’t currently afford to build on.
- Northern Ireland welcomed the news that it will get its own pilot Enterprise Zone to match those already operating elsewhere in the UK. These areas give fast growth firms business tax breaks and help their development by offering simpler planning procedures.
The Budget also revealed some of the Government efforts that have already paid off for smaller companies. More than 14,000 new businesses have come into being through support from official Government-backed Start-Up Loans since April 2012. The British Business Bank helped more than 25,000 SMEs in 2013, freeing up 70 per cent more finance than was available in the year before. More than 3,000 pieces of regulation have been earmarked for abolition as part of the Red Tape Challenge. And almost 66,000 UK firms have received support from UKTI to get them exporting since 2010.
In general terms, the Budget appears to indicate that we’re on our way to economic recovery. But, there’s much more that can be done to help SMEs play a real part in this revival of Britain’s fortunes. And here at Boost Capital, we hope to see the proposed changes made to give smaller companies the best chance of gaining access to the funds they need to grow. Businesses have been saying that this is what they want – and need – for a long time. It’s good to see that the politicians have started to listen to them.
Image courtesy of Serge Bertasius Photography / FreeDigitalPhotos.net