After the volatility that followed last year’s “mini-Budget”, the aim for this year’s Budget was to be “boring”. However, between the revised projections on inflation and growth moving in the right direction, and a series of announcements on childcare, investment reliefs and tax credits, businesses had a lot to think about. To gather the thoughts of industry groups and business owners, NatWest brought together its SME Taskforce to talk through the implications of the Budget, what is missing from it, and where to go next.
While some of the economic signals had moved tentatively to the good ahead of the Budget, taskforce members remained nervous. Energy costs remained a big unknown and concern for members, with many businesses either now paying elevated fixed rates or facing a significant rise from contracts signed before the price spike. Taskforce members recognised the need to be on the look-out for businesses struggling in the face of higher costs and higher tax bills, which ultimately would hit consumers, warned Phil Bartlett, an economist at NatWest. “There were a number of things that the Chancellor [Jeremy Hunt] could have done to send a much stronger signal to SMEs to say, ‘Yeah, we’re on your side,’” he said.
“For me, it feels that things are harder at the moment than they were at the peak of the Covid era,” said Kathy Caton, founder of Brighton Gin, who warned that discretionary goods providers would all be feeling the pain as consumer spending dropped. “I guess lots of it actually has to do with support and measures in play.”
This was echoed by Karen Licurse, the managing director of Digital Boost, who has noticed a shift in the types of requests for support her company has been getting around cashflow issues. “A lot of people who, quite honestly are feeling incredibly alone and lost as a founder and as an owner just want someone to talk to,” she said. Digital Boost runs a white-label service, which supports access to mentors and technology to democratise the support available. The businesses and trade bodies on the taskforce were concerned that the reality on the ground meant that the government’s ambitions to get businesses investing were unlikely to be realised.
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To that end, Martin McTague, national chair of the Federation of Small Business, viewed the Budget as “a let-down”. His members felt the policies to get people back into work were “poorly targeted” and the criteria for support for research- and development-intensive businesses was too narrow compared to other countries like Australia. This was echoed by Charlotte Thomason, head of policy and government relations at Enterprise Nation, who noted that small businesses in particular will not necessarily see the benefits of these policies as fast as they will feel the costs. “It felt like it was a Budget for higher growth, big or bigger businesses, overall,” she said. Focusing on the R&D tax credit, Brighton Gin’s Caton pointed out that her business has had to take a step back from this due to the high cost of doing business. “Feeling a bit forgotten, I think sums it up,” she reported.
The taskforce welcomed the long overdue attention on childcare, but there was scepticism about its short-term impact. McTague noted that providers had already been cross-subsidising costs for younger children and the new system may present challenges for meeting demand at the level of funding being provided. Bartlett was more optimistic at the direction of travel, seeing it as the “start rather than the end”. He hoped that the signal from the Chancellor that childcare issues were now taken more seriously would mean addressing supply-side issues in the childcare sector and realising those benefits across the economy. Douglas Chapman, the MP for Dunfermline and West Fife, echoed this sentiment, noting the experience in Scotland when childcare was expanded, and the need to build-in capacity over the medium term. “It’s probably not going to have the immediate impact that you would want in terms of getting people back to work,” he observed.
A positive was the desire of members to embrace trading opportunities abroad, but many felt more attention on advice and support was needed here. Caton felt that her business, Brighton Gin – “as a manufacturer that uses a lot of energy and is looking to expand internationally” – had little to focus on. “For those looking to export, the first step is to have a solid foundation in the UK,” she added. Shalom Lloyd, the founder of skincare company Naturally Tribal Group, agreed. She felt that the image of British businesses abroad being ready to export that she had seen while on trade trips was not matched by the domestic support needed to ready them to take that step. “More attention on breaking down barriers and guiding businesses is needed,” concluded Jonny Haseldine, policy manager at the British Chambers of Commerce.
A unanimous view among members was that constant and repeated changes to the support landscape for businesses was causing confusion and harm to their growth prospects. “An entrepreneur doesn’t have the time to engage with a new system every six months, which leads to them just not engaging and losing out,” said the Federation of Small Business’s McTague.
Personalisation of support was viewed as a key pillar that government should embrace. Irene Graham, CEO of the ScaleUp Institute, drew the distinction between what support should be available for startups, scale-ups and mature businesses. Andrew Harrison, head of business banking at NatWest, pointed to bank research showing that under 5 per cent of SMEs participate and benefit from support programmes. A one-size-fits-all model was seen to be ineffective by the taskforce.
A collaborative approach between government and industry to find what worked well was vital, argued Graham, pointing to the varied success of regional growth hubs. Enterprise Nation‘s Thomason agreed that “we’re coming up with the solutions, but government now needs to do their bit as well and actually implement some of these solutions”.
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