More than half of UK small and medium-sized businesses are postponing major investment decisions until after the Autumn Budget, amid concerns about taxation and operating costs.
Research from Bibby Financial Services (BFS) found that 54% of SMEs are delaying significant investment as they await greater certainty over government policy.
The findings, published ahead of the Budget on 28 October, also suggest considerable scepticism about the government’s economic plans, with only one in five SMEs expecting the announcements to benefit their business.
BFS’s latest SME Confidence Tracker indicates that reducing the cost of doing business is the principal priority for companies, with corporation tax, National Insurance and business rates among their main concerns.
TAX REDUCTIONS TOP BUSINESS WISH LIST
Almost half of respondents (46%) want the government to cut corporation tax, while 43% are calling for a commitment not to increase it further.
A freeze on capital gains tax is supported by 41% of SMEs, while 39% want the government to reverse increases in employers’ National Insurance contributions.
More than a third (36%) would also like business rates relief currently available to retail, hospitality and leisure businesses to be extended to other sectors.
The results underline the challenge facing Prime Minister Andy Burnham and Chancellor John Healey as they prepare their first Autumn Budget, particularly given the government’s stated ambition to create a more favourable environment for businesses.
Derek Ryan, chief executive for North West Europe at Bibby Financial Services, says: “Prime Minister Andy Burnham has said he wants the UK to be the most ‘pro-business country in the world’. If he’s serious, he must lower the cost of operating.
“That means cutting corporation tax, or at the very least guaranteeing it won’t rise again and reversing the increase in employer National Insurance. Extending business rates relief beyond retail, hospitality and leisure would also ease pressure on cashflow, free up working capital and remove a major barrier to growth.”
INVESTMENT HELD BACK BY UNCERTAINTY
The proportion of businesses delaying investment suggests that uncertainty over the forthcoming Budget is influencing decisions about expansion, recruitment and capital expenditure.
Ryan argues that businesses need greater clarity over future tax liabilities before committing resources to growth.
He says: “SMEs have heard pro-business promises before and been let down. Now they are waiting to see whether this government will deliver.
“More than half of SMEs are holding back major investment until after the Budget, unable to plan for growth without knowing what their tax bill will look like. That’s money not being spent on new equipment, new hires, and new products, which is exactly the activity this government says it wants to unlock.
“SMEs don’t lack ambition. What’s holding them back is the weight of the current tax burden. Ease that burden, give them stability, and they’ll invest.”
For businesses seeking to fund expansion or manage working capital, the forthcoming Budget will provide an indication of whether the government intends to address the tax pressures identified in the research.
