Businesses cry foul as Budget comes up short

SMEs seemed to be feeling pretty short-changed in the immediate aftermath of the Budget...

Last Updated: 31 Aug 2010

Small business organisations believe that they were ‘largely ignored’ in Chancellor’s Alistair Darling’s Budget yesterday. Despite the Chancellor promising in advance that there would be a ‘Budget for jobs’, there wasn’t much for small firms to shout about – despite some measures to boost cashflow, backstop credit insurance and incentivise investment, most of their calls went unheeded – leading to more dire warnings about the potential consequences for the engine room of UK plc...

Let’s start with the positive stuff first. The increase in capital allowances for firms investing more than £50,000 – intended to incentivise firms to keep investing through the downturn – certainly went down well (although it remains to be seen how many SMEs will be in a position to take advantage). And as a way of boosting cashflow, an extension of the carry-back rules, which allows firms to offset losses against the past three years' profits, was also broadly welcomed. ‘The previous proposals were more restrictive and this would have limited their usefulness to small businesses,’ says Grant Thornton’s head of tax Francesca Lagerberg (we’ll take her word for it).

But in general, the bad news outweighed the good. Take the credit insurance ‘top-up’ scheme, which will see the Government match private sector provision for companies who’ve seen their cover reduced. However, it looks as though those who have seen their cover withdrawn completely will get nothing. The Association of British Insurers welcomed this, suggesting it would be wrong for the Government to second-guess the judgement of its members – but as Alvarez & Marsal’s Malcolm McKenzie says, ‘What about those who are up the proverbial creek without a paddle?’ It also remains to be seen whether state funds will be accessible quickly enough even for those who are eligible.

Small business groups have also been complaining that although the Chancellor put aside funds to help the long-term unemployed, there was nothing to help small firms hang on to their current staff. Proposals for a subsidy for part-time working (possibly through the Working Tax Credits Scheme) were ignored. Meanwhile the increase in statutory redundancy pay and fuel duty will add extra costs, as, significantly, will the hike in employers’ NI from 2011. Business groups wanted this scrapped (along with, inter alia, a cut in small business corporation tax and a freeze on business rates), but the Government was having none of it. ‘In what has been the most crucial budget in decades, the FSB is disappointed that small businesses have been largely ignored,’ moaned its chairman John Wright.

Oh, and business owners also now face being taxed at 50% if their company does well enough to push their earnings above £150k. So you couldn’t blame the SME community for feeling rather disillusioned today...

In today's bulletin:

IMF adds to gloom as Darling fails to slay deficit dragon
No cigar for Grade as ITV boss moves upstairs
Revitalised Debenhams plans expansion as profits surge
Businesses cry foul as Budget comes up short
How to make your management recession-proof

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