Member Article

Budget 2016: London and South East SMEs call for less red tape

Ahead of the Chancellor’s Spring Budget on Wednesday, we have been canvassing hopes, expectations and predictions from SMEs across London and the South East before George Osborne takes to the floor in the House of Commons on Wednesday.

While many of those we spoke to at Bdaily are predicting a relatively sedate set of announcements with few surprises or major shocks, the need to reduce red tape and simplify the tax system for SMEs was a common refrain.

Reducing red tape

Martin Campbell (pictured), Managing Director at FinTech startup Ormsby Street, gave a less than complimentary assessment on the government’s achievements for small businesses: “Much of what has been done so far by the Conservative Government has been pretty uninspiring for small businesses.

“So this budget is the chance to lay down a real marker, recognise the importance of small businesses and provide the support they need to enable growth.

“This should absolutely include no additional tax burden and a simplification of the tax legislation already in place. We work with tens of thousands of small businesses and what is clear is that many are drowning in red tape and an overly complex regulatory environment.

“Running and growing a business is hard enough without having to keep up with each government department setting its own - often conflicting - standards and thresholds for tax.

“SMEs can easily fall foul of this, so introducing some clarity and simplicity to the small business tax landscape is a realistic measure that would help small businesses all over the UK.”

Echoing Martin’s sentiments about the need to ensure that business owners’ time is not unduly taken up by onerous bureaucracy, Julia Kermode (pictured), who is Chief Executive Officer of the Freelancer and Contractor Service Association, comments: “[I] don’t want to hear about any more regulation set to affect [the freelance] sector; we have had many changes to manage in recent years and the Confederation of British Industry estimates the cumulative cost of recent changes is around £9 billion per year.

“With the Department for Business Innovation & Skills announcing recently that the government is committed to reducing the burden of regulation, it would be refreshing to see this principle applied to tax regulations too.”

Economic climate

The global context of this week’s budget is also weighing heavily on the minds of many of the South East and London’s SMEs, with the chancellor taking a darker tone in recent months due to the problems facing the world economy.

Despite economic woes in China and plunging shares in banks across the world, Richard Freeman, Director and Founder of Sussex-based education consultancy Always Possible, believes the budget will be a tame one from George Osborne.

He explains: “We run a business that supports organisations of many different structures, sizes and purpose to operate with more confidence. At the moment, this is particularly challenging.

“George Osborne has a new budget to deliver and the swings from supreme confidence to doom-laden anxiety have been quite something. Yet, of all of them, we predict this to be the most vanilla, with the fewest headlines, and deliberately so.

“We’ll be listening carefully for any more detail about the devolution of business rates to local authorities, the consequences of which could either be the making or breaking of more disadvantaged towns. Each council will need to balance the need to fill large revenue-voids imposed through austerity, with a strategy to be competitive and to nurture small businesses through tax breaks and incentives.”

Gary Turner (pictured), Managing Director at online accountancy software firm Xero, also touched on the topic of business rates. He believes that small businesses would benefit from, what he terms, ‘fundamental changes’ to business rates: “Costs are rising for small businesses in every aspect, from the increased National Living Wage and the new apprenticeship levy to quarterly digital tax reporting and pensions Auto Enrolment.

“[A]s the UK is already lagging way behind G8 nations in terms of productivity, the financial burden will only make this worse. To alleviate this, small business owners will require fundamental changes to business rates to boost confidence, financial security and productivity.

“Although plans to alter tax relief have been dropped from this Budget, the spotlight on pensions continues with Auto Enrolment preparation being front-of-mind for small business owners.

“This is another cost, and without the right software, a complex addition to business management - the cost of which small businesses will again want alleviated somewhere.”

Recognition for SMEs

Gary also believes that the contribution of SMEs to the UK economy needs to be recognised and nurtured as their individual costs are rising all the time. He adds: “The latest GDP forecasts are looking weaker than George Osborne will hope for, implying a subsequent knock-on effect on taxes and austerity.

“With the population of SMEs making up 99.8% of the British economic engine, the impact of their success or failure is critical to the health of the economy.

“Xero will be looking for the 2016 Budget to give bigger backing to small enterprise, boosting confidence to ensure economic growth stems from SMEs and reduces the need for continually increased taxes.”

Similarly, Luke Davis (pictured), Chief Executive Officer at IW Capital believes the budget is an opportunity for the Chancellor to recognise the inarguable importance of SMEs to the economy, and support their growth and development: “This Budget provides an ideal opportunity for the Government to propel British SMEs forward. However, so far there has been little in terms of Budget predictions that focus specifically on business development.

“Pension reforms, merging income tax and national insurance, further spending cuts, and issues surrounding a potential Brexit have all been touted as topics that will dominate Osborne’s Budget, yet any SME-related announcements appear to have been overlooked.

Given that SMEs account for 99% of the UK’s private sector and contribute £1.8 trillion to the economy, one would hope that the Government introduces targeted policy to ensure the long-term prospects of this community of small businesses. The Budget should fully commit to supporting their growth needs.“

Green energy investment

The government has come in for significant criticism in the last 12 months due to its increasing reluctance to subsidise green energy initiatives, such as residential solar panels.

With the Paris Agreement due to be signed next month, businesses in the energy sector insist that the chancellor needs to do much more in order to promote the UK’s green credentials and support homeowners and businesses in adopting more efficient energy schemes.

David Mathieson, Managing Director at Swale Heating is particularly stinging in his criticisms, commenting: “Our industry has been campaigning for years to get the Government to reduce the VAT rate on high-efficiency boilers.

“It’s morally wrong to keep the rate at 20% when other energy-saving products such as insulation, heat pumps and solar panels attract just a 5% rate.

“The Government could make a significant step towards driving a lower carbon culture and reduce gas usage quickly, cheaply and with minimal administration costs simply by cutting the VAT rate during the Budget.

“Not only would this make a new boiler far more affordable for many families, it would also discourage them from using cheap, illegal fitters to save money.”

Boosting industry

With the construction industry slowly returning to its pre-crash levels, Peter Whitmore (pictured) at Wates Construction in Southern Home Counties and South West, believes the government needs to address a growing skills gap in the sector: “What the construction sector now needs are tangible steps from the government to push investment in skills and training higher up the political agenda.

“Only this will enable us to maintain the growing momentum in new building projects and thereby contribute to the continued economic prosperity of the nation.

“There is no doubt that the picture painted for the future of construction is a very positive one. This picture, however, will look radically different if efforts to address accessibility and opportunity in skills training aren’t addressed in the next budget announcement.”