With dust beginning to settle on George Osborne’s fourth Budget speech, entrepreneur James Layfield looks at whether, yet again, the middle ground SME has been forgotten about.
The chancellor branded this year’s Budget one for an aspiration nation. Which meant it should have been all about growing the economy and allowing businesses to thrive.
Did it deliver?
Well, not from where I’m standing.
My business, Central Working, provides a location and the infrastructure for start-ups and small businesses who want to grow – and it’s very clear that they’re helping drive the economy.
The problem with this Budget was that there was a lot of hype and spin about empowerment, but not a lot of deliverables. While a lot of the measures announced sound great, when you look at the detail, they won’t really make much difference – they’re a token.
So, everyone has heralded the cut in corporation tax to 20 per cent. Well that will be amazing if you run a company that turns over billions, but most SMEs aren’t. For a company making £1 million profit – and you’ve got to be an incredibly successful company to being do that – it will make £10,000 difference a year. So for smaller companies, the benefits will be negligible.
And the changes to national insurance are just tokenism. They might make a difference to companies with just one employee, but many more than that and a £2,000 saving really doesn’t make a whole lot of difference.
What would have been useful would be a two-year NI holiday for businesses taking on staff – that could have benefitted all businesses.
So, on the one hand is a measure that will benefit major businesses, and on the other, one that helps micro businesses, but not a lot there for anyone running a business in the middle ground.
More on the Budget 2013:
- Corporation tax cut to be accelerated
- National Insurance boost for SMEs
- Stamp duty tax on AIM shares eliminated
- Investors in SEIS secure extension to capital gains tax relief
Of course there were measures that sound like good news, such as the £25 million tax relief for creative industries. In reality, that’s just a drop in the ocean given the turnover of those industries.
And while the cut in fuel tax is great for your profits if you run a delivery company, I can’t see those benefits being passed on to the end users they supply, so again, they won’t make much difference.
Above all, what this Budget needed to do was find creative ways to free up funding. The problem most small businesses face is that the investment market remains obsessed with risk and the main barrier for the majority of SME’s is access to funding. There is a real problem with liquidity, particularly in the £100,000 – £1 million bracket.
This is a hot topic of conversations when I meet monthly with my fellow members of the Entrepreneurs Organisation.
We all feel that while it’s right that banks have to be compliant with many rules and regulations, it has the undesired effect of slowing down the process for many small businesses in their infancy, regulation can cripple small business.
Measures such as the government’s SEIS are welcome there can be too many stipulations around access to investment.
At the start of his speech, the chancellor mentioned the much heralded business bank and the Funding for Lending Scheme, but yet again, there were no more details – it was all very vague.
On paper some of the measures he did announce sound good – the increase in the government procurement fund through the Small Business Research Initiative, the single competitive pot of funding for local enterprises.
But it’s all very well creating interestingly named initiatives, if the businesses don’t understand what they are and how to access the cash, then they are a waste of time.
In a week’s time they will be forgotten about; and therefore no-one’s going to apply because they don’t even know how to or what they even are. They’ve done this before – created schemes which are so complicated to get the money, that the only way to apply is to get another company to work for you to help you fill the forms in.
It’s insane. The government has to find a way to communicate clearly and simply how businesses can access the money.
If SME’s are the engine of the economy it’s the government’s job and the job of banks make the ideal conditions for growth.
I would like to have seen the Loan Guarantee Scheme revised, and fast tracking for small businesses for access to bank accounts and funding more quickly and greater incentives for big business to step in and fill the funding gap for SME”s left by venture capitalists moving up the chain and banks failing to lend.
Comment and analysis on the Budget 2013:
My experience running a business in Tech City has shown me that if the government sheds a light on an industry and that industry gains some momentum, it will flourish. I know they announced tax relief for creative industries, help for the potteries and money for infrastructure, but I’d have liked this to go much further, and this approach being applied to other growth industries in the UK.
If George Osbourne wanted to encourage an ‘aspiration nation’, it should have been all about people engaging in entrepreneurial activities to better themselves.
Sadly, I don’t think this Budget will deliver that. But entrepreneurship is about the spirit of making things happen, and that’s exactly what we will continue to do – with or without government help.
James Layfield is a serial entrepreneur who now runs the rapidly expanding Central Working, which provides entrepreneurs and businessmen with a work and meeting space. He was voted Entrepreneur of the Year in 2012 by the Entrepreneurs Organisation, and the company was cited as one of the UKs top 100 start ups in 2012, and now has three clubs, including one in the Google campus in Tech City.
James belongs to the Entrepreneurs Organisation, whose members have all successfully founded businesses with over $1million in revenue.