Small and Medium Sized Enterprises (SMEs) have received a much needed boost from the Government at a time when they need it the most, says ACCA (the Association of Chartered Certified Accountants) in response to today’s Budget.
Manos Schizas, SME policy adviser at ACCA, says: “The Government’s intentions were clear: to pile on what incentives it could afford in order to ensure the UK economy rebalances into one that is more reliant on enterprise and manufacturing. All of this is of course very welcome.”
Advance figures from ACCA’s latest Economic Conditions Survey show that accountants working for small businesses have lost confidence since the last quarter (please see the graph in the Related links box in the top left-hand corner of this page). The Government’s support is therefore well timed. In particular, the commitment to making Britain the best place in Europe to start, finance and grow a small business is an extremely welcome signal, even though in real terms this is probably already true.
Mr Schizas adds: “Experience and statistics tell us that SMEs need real and practical assistance when a recovery’s happening, and not just in the depths of recession, so we’re really pleased to see the 21 new Enterprise Zones and the removal of £300m regulatory burdens – as long as they are such burdens- for SMEs.”
The merger of Pay As You Earn (PAYE) and National Insurance will be a hugely important project of simplification that will benefit SMEs, although not really in the short term. ACCA says that businesses should start to plan ahead as soon as there is clarity on how this is to be achieved.
Looking in more detail at Enterprise Zones, Manos Schizas sounds a note of caution, saying: “The fact that 10 out of the 21 Zones are yet to be determined and will be put up for tender suggests the Government isn’t entirely sure what it would like to do with them. Such long-term decisions, however, should not be taken lightly, so the case for an additional 10 Zones must be made first. ACCA is confident that it can be made, but notes that if Enterprise Zones are to be a success then they have to demonstrate that they are good value for the substantial concessions given.”
ACCA also welcomes the doubling of entrepreneurs’ relief to £10m, noting that further increases must be mindful of where the market failure in equity investment is focused – or else the Government could end up overshooting.
Manos Schizas explains: “Our understanding is that informal investment by business angels has been falling for the past two years, although of course getting the right data is challenging. Either way this is bad news for the UK’s most promising enterprises. In this context the increase in the Enterprise Investment Scheme to 30% from 20% is really very good news.
“All told, EIS is used in over half of all angel investment (57%) and is essential to about a quarter (24%) of it. Perhaps more importantly, it appears that EIS-enabled investment has been less sensitive to the economic downturn in 2009, falling by 25-30% instead of the 30-40% fall recorded by business angel networks overall. The incentives announced for non-doms to repatriate some of their profits through investment in UK-based companies could have similar results if properly targeted.
“On the other hand, the 15% increase in bank lending announced under the Merlin agreement is much less promising. In fact I seriously question whether it will materialise.”
One announcement that hasn’t yet received nearly enough attention was the Chancellor’s commitment to an improved Intellectual Property (IP) regime. The Growth Plan contains a very welcome commitment to improvements targeting the Creative and Digital industries as well as the Health sector in particular, including much-needed assistance in dealing with IP authorities abroad. It also promises no further reviews in the medium-term, which should encourage investment.
ACCA says that what will definitely help is the Government’s commitment to reorienting taxpayer-subsidised export credit products towards SMEs – as the domestic market becomes comparatively smaller, SMEs are naturally looking abroad and finance is clearly one of the major obstacles for would-be exporters.
Manos Schizas concludes: “Finally, I was hoping to see some detail on how SMEs will be assisted in accessing government procurement, so I am very pleased to note in the Growth Plan an initiative to encourage innovation in NHS procurement. But in conclusion, this Budget has sent a very clear message about what kind of industry the UK Government wants to encourage.”