It is true that businesses don’t cast votes but with the Coalition’s dependency on small business driving the country out the recession surely it can’t be politically savvy to abandon them in favour of the electorate as they enter the home stretch.
The second question on our minds ahead of Wednesday’s Budget is what can be announced that can actually be implemented before the election? 14 months is not a long time in political timescales. If we look back to Budget 2013 and what has been implemented 12 months on, the slow pace of the political machine is more than apparent. One of the big announcements at Budget 2013 for small business was the Employment Allowance – that won’t be seen until next month. Growth Vouchers, which have real potential to deliver a real incentive for business support, only went live at the end of January this year, nine months after being announced.
2014 may well have started more positively than recent years, but there remains a feeling of cautious optimism from businesses. The Forum of Private Business wrote to the Chancellor last month suggesting a series of possible measures that could be implemented quickly and support small businesses to maximise their growth potential.
The biggest ask from business that the Coalition have been so far unable to crack is business rates. When last polled 97 per cent of our members said property taxation is too high. In the last year half of members had seen their property costs increase, 37 per cent reported they had stayed the same; not a single member reported a decrease in property costs. Accepting that business rate reform is a long-term project the Forum is asking for a commitment (from all parties) to bring the review currently scheduled for 2017 forward to 2015.
The other ever-increasing cost small businesses are facing is energy costs. Instead of switching, many businesses are absorbing the rising costs of energy. In 2011, 9 in 10 members of the Forum of Private Business environment panel had responded to increased utility prices, with 41 per cent tightening up processes and 28 per cent reducing usage. However, two years and a further 20 per cent increase in energy costs later, there is little more they can do internally to mitigate the costs. Small businesses have been reluctant to pass on costs to their customers in recent years and have absorbed higher bills. With 87 per cent of businesses seeing a rise in energy bills again over the past year, this situation is increasingly untenable.
The Forum of Private Business has recommended to the Chancellor that small non-domestic energy suppliers should see their business customers exempted from the Climate Change Levy (CCL) in the same way that independent domestic providers are exempt from the ECO tax. Removing this levy has the potential to take £256.30 off a typical bill of around £5,600.
Alongside cost cutting measures, the government needs to ensure the UK’s labour market is fully equipped with the skills required for enterprise. One straight forward move the Chancellor could look to implement is an extension to the Apprenticeship Grant for Employers (AGE 16-24). The incentive, introduced in 2012, covered a £1,500 grant per apprentice. Eligibility for the grant was extended to employers with up to 1,000 employees last year, however to deliver greater value for money the Forum believes the government should commit to use AGE 16-24 to deliver targeted support to SME employers (with up to 249 employees) until the apprenticeship funding system is fully reformed.
Rebalancing the economy through export growth has been the major piece of the puzzle in Osborne’s economic plan that has failed to materialise. The Forum has presented the Chancellor with an option to incentivise exporting through a tax relief. Based upon the principles of Research and Development Relief, an Export Activity Relief would reduce an eligible company’s tax bill by offsetting either sales or allowable costs against Corporation Tax. Such aid would be limited to certain sectors and needs to pass State Aid tests, but would be a huge incentive for companies to invest more in export, which is needed by the UK to meet the £1trillion target for exports by 2020.
Encouragingly, this year Forum members reported for the first time since 2010 that finance is no longer the major barrier to growth – time has replaced it at the top spot. However figures from Bacs show that the late payment remains a significant issue for SMEs and payment times are continuing to creep up with the average waiting time for payment now sitting at 38 days. This government has paid great lip service to late payment, successfully raising the profile around the Prompt Payment Code among FSTE companies. Nevertheless more needs to be done to support small businesses in their struggle against late payment.
This Budget will undoubtedly be a feat in electioneering – we’ve already had David Cameron pre-empting his right hand man with the announcement of a National Minimum Wage increase. However our eyes will be firmly fixed on the Chancellor to deliver a package of ongoing support for the engines of his economy, upon whom his economic plan has been dependent on for the past four years.