Time Finance chief executive Ed Rimmer has urged the government to use the Autumn Budget to ease pressure on SMEs and give businesses greater confidence to invest.
Rimmer says taxation, business rates and the implementation of regional devolution will be important tests for the new government as companies continue to contend with high operating costs and tight margins.
His comments come as the government seeks to balance spending commitments with its pledge not to increase VAT, income tax or employee National Insurance.
With those taxes accounting for a significant proportion of government revenues, Rimmer says businesses will be watching closely to see where the Chancellor seeks additional fiscal headroom and whether companies will face further costs.
TAX PRESSURES
Rimmer (pictured) points to the UK Finance SME Finance Monitor, which found that almost 50% of SMEs employing 10 or more people identified current taxation levels as their main barrier to doing business.
He says the 20% business rates reduction introduced for live music venues and pubs in England this summer demonstrates the scope for targeted relief, but argues that pressures extend beyond the hospitality sector.
With overheads remaining elevated and the energy price cap expected to rise by 4% from 1 October, Rimmer says businesses will be looking for signs of either wider tax relief or reform of the business rates system.
He believes measures that improve household finances could also benefit SMEs indirectly by supporting consumer spending and feeding demand back into the wider economy.
DEVOLUTION AND LOCAL BUSINESS
Regional devolution could create opportunities for investment in infrastructure, skills and local economies, according to Rimmer, although he cautions against creating greater complexity for businesses operating across different parts of the country.
He says: “Regional devolution is a double-edged sword for millions of businesses currently navigating high overheads, operational costs and extremely tight margins.
“Empowering Metro Mayors to prioritise infrastructure, skills funding and strategic investment is a positive shift, but it remains to be seen whether greater control over local funding will drive long-term localised growth.
“Crucially, businesses fighting for survival cannot afford a postcode lottery of fragmented business rates, localised tax variations or administrative red tape.”
Rimmer says devolving more decision-making could nevertheless allow local authorities to respond more closely to the requirements of their economies, particularly if investment helps to increase consumer spending within individual regions.
CONFIDENCE TO INVEST
Rimmer argues that the wider measure of the Budget’s success for SMEs will be whether it gives companies enough confidence to move beyond managing short-term cost pressures and begin investing again.
He says: “Beyond the tax headlines, the ultimate success of Burnham’s first budget hinges on whether it can successfully instil businesses with the confidence they need to move from cautious survival to active investment, something that’s vital for both individual business growth as well as the wider economy.
“Across the UK, SMEs are feeling the weight of sustained cost pressures, and their overheads will all be front of mind this October as the Budget is announced.
“And if the government can enable cash flow to effectively run through the economy by stimulating consumer spending, there could well be a light at the end of the tunnel for businesses this autumn.”
