Budget Fails To Help Small Businesses

Proposals to improve access to finance, ease the burden of costs and stimulate economic activity were absent from yesterday’s announcement. In addition, although the Government has unveiled a new £1.7 billion job creation fund, nothing has been done to help smaller employers hold on to their key staff.

“We are experiencing the worst economic conditions that most business owners have ever seen. We needed a bold strategy for business recovery, which the Chancellor has failed to deliver at all levels,” said Noel Guilford, the FPB’s national chairman. “The FPB made numerous and significant proposals which would have had the effect of providing immediate help to struggling businesses, nearly all of which appear to have been ignored.”

In its latest quarterly Referendum survey, members of the FPB voted for restoring business confidence (65%) and restoring consumer confidence (63%) as the two issues they most wanted the Government to prioritise in the Budget in order to support their businesses. The FPB addressed four key elements in its submission to the Government: improving access to finance for small businesses, minimising the cost burdens of small businesses, protecting employment, improving economic activity and improving access to finance for small businesses.

In addition, although the FPB called for better protection for businesses suffering from increasing late payments, many businesses will not qualify for the new £5 billion credit insurance scheme, which is temporary (it will come into effect on 1 May and cease taking applications on 31 December 2009), and will only be available for businesses that have had their credit insurance cut from 1 April 2009. Companies which have had it withdrawn completely will not be covered.

Although doubling some capital allowances and extending loss carry-back will help some small businesses with their cash flow difficulties, none of the FPB’s proposals to reduce the burden of creeping costs, including cutting the lower rate of corporation tax to 20%, scrapping increases in fuel duty and freezing the minimum wage were adopted by the Government. In addition, measures to ease rates costs, including making enrolment for Small Business Rate Relief automatic, reconsider imposing supplementary business rates and freezing the scheduled 5% increase in business rates (the Government is instead spreading out the increase over three years) were not taken up.

Finally, despite the FPB’s latest Referendum survey suggesting that some businesses are experiencing a slight improvement in markets, the Government has not produced a plan to stimulate economic activity by opening up public contracts to small firms. In addition, rather than a fund to stimulate house builders, a special lending scheme for first-time buyers would have provided a genuine stimulus to the housing market.

The FPB’s Chief Executive, Phil Orford, said, “The Chancellor has missed a vital opportunity to produce a Budget for business survival and economic growth. We called for a real and sustained support strategy, acting as a catalyst for broader economic recovery, but instead we got a Budget that appears to be focussed on the next general election.

“While some of these measures will benefit low-carbon companies and new technology start-ups, they will do little to restore business and consumer confidence and stimulate economic activity. Although the long-term unemployed will benefit from investment in job creation and training from 2010, nothing has been done to help businesses retain their existing skilled workforce, which continues to be decimated as a result of the recession.

He concludes, “While welcoming changes to capital allowances and loss relief, the reality is that these will have only provide limited benefit to smaller businesses. In addition, restrictions to the new credit insurance scheme and the failure to address business taxes remain considerable barriers to business survival and growth.”