After a year that saw soaring inflation, rising interest rates and substantially increased energy bills conflate into a cost-of-living crisis, the impact has affected businesses and households alike.
SMEs are particularly challenged, and not only by rising costs. Falling revenues and late payments both have an effect on cashflow, and that’s evidenced by a growing number of insolvencies. This means that supporting SMEs with practical cashflow solutions is becoming more important than ever, not just to help them survive, but also to prosper and grow.
We’re certainly playing our role, but we need support from the Government. To that end, to what extent does the Spring Budget help the small business community?
Whilst not strictly a Budget announcement, the plan to increase corporation tax from 19 percent to 25 percent for businesses with profits above £250,000 will go ahead on the 1st of April. Up to £50,000, SMEs will pay tax at a rate of 19 percent, and between £50,000 and £25,000 there will be some form of marginal relief. The Chancellor, however, has claimed that only 10 percent of companies will end up paying the full 25 percent rate, which appears to be good news.
With prior worries relating to investment incentives, the Chancellor has introduced a new scheme, ‘full expensing’. Full expensing allows companies across the UK to essentially ‘write off’ their full costs of qualifying IT, plant and machinery investment in the year that they invest in them. This will be effective from April 1st, taking off where the prior scheme left off, allowing cost deductions to be taken from taxable profits. Again the Chancellor has stated that the scheme would be made permanent ‘when fiscal conditions allow’, and there will be an additional tax credit for small and medium sized businesses that spend 40 percent of their expenditure. More good news, it appears.
There was more good news in terms of regional investment. Eight areas across the UK (the West Midlands, Greater Manchester, the North-East, South Yorkshire, East Midlands, Teesside and Liverpool) have been chosen to house new Investment Zones. These will have a particular focus on digital and tech industries, green industries, life sciences, advanced manufacturing and creative industries in a plan to drive national productivity growth. These zones will receive interventions of up to £80m over a five-year period, including tax reliefs and grant funding. Local government and research institutions will tailor these plans to their local circumstances in a move to propel growth in priority sectors, identify private sector match funding, and support local growth with meaningful, targeted investment.
Energy Price Guarantee
The rising costs of energy has been a concern for all SMEs, but especially those in manufacturing and production. To that end, The chancellor confirmed that the Energy Price Guarantee will be extended at its current level for an additional three months, from April to June. The Energy Price Guarantee which capped typical energy bills at £2,500 a month. However, unwelcome news has come in the form of the Energy Bill Relief Scheme coming to an end on the 1st April. It will be replaced by the Energy Bills Discount Scheme, a plan which sets out to offer discount on wholesale prices of gas and electricity, rather than a fixed rate, that is planned to run for 12 months from 1st April to the 31st March next year.
This will be available to all consumers in a non-domestic setting, with particularly energy-intensive businesses receiving larger discount than other industries, applicable for up to 70% of all energy volumes. If you run your business from home, unless you use 50 percent or more of your household energy for business use, and you own a business energy account, the standard energy price cap will apply.
Of course, the real elephant in the room is inflation. Tackle inflation, and some of the other issues disappear. Forecasts suggest inflation will fall from 10.7 per cent in Q4 2022 to 2.9 per cent at the end of 2023. Let’s hope that’s not wishful thinking. Similarly let’s hope that the predictions from the Office for Budget Responsibility (OBR) are also correct, and that whilst our economy is contracting, the UK will avoid recession.
But it’s going to be tough. Whilst fiscal restrictions set out to improve economic growth and productivity, they seldom leave room for small business and entrepreneurship. That is again where we step in. If businesses are to grow, and truly thrive, they need the confidence and the funding to manage cashflow sufficiently, cover costs and drive innovation.
If your customers are looking for hassle-free funding that is flexible to their business needs, or require an advance to cover late payment, get in touch and contact us at email@example.com