Despite reports in the media, there is quite a lot in last week’s Budget for the SME owner, aspiring entrepreneur and investors.
Small company tax rate cut. NIC threshold up, Labour’s stealth tax increase to NIC already scrapped. A cut in corporation tax and the ‘entrepreneur’s relief’ threshold up to £5M. Business Angels will get a substantial 10% increase in EIS, to 30%, allowing them to invest up to £500K in EIS approved businesses.
A good budget for investors and entrepreneurs selling up.
Will these incentives make a difference to the fortunes of small businesses? Unless they are looking for investment, very profitable or significant employers, no it won’t.
The climate in which we are trading is not helpful to building sales or profit; a result of government policies over the past fifteen years. Governments hope that private companies will generate wealth, at all levels of society but have made employing staff the most expensive and risky in Europe. Overall wealth generation can only be distributed through employment. Despite this there is little happening to reduce the risk in employing more people and only token gestures towards reducing the cost.
Operating costs have risen substantially through fuel costs, business rates, insurance premiums, raw materials and exchange rates. If you trade with customers not registered for V.A.T. your gross tariffs have already been forced up.
Private enterprise is expected to find employment for those public servants who are surplus to requirements. Most private businesses have a jaundiced view of public servants. The cost and risk involved in providing employment demands a high level of productivity from employees and I suspect most of the public and third sector have little idea of what that means.
In summary the budget does appear to offer a lot to some sections of business and but it changes little for the majority. They are still battling a hostile environment.
Some of us have been through similar times in the past. The recession of twenty years ago was tough, the recession of thirty years ago was much tougher and very similar to the current situation. Few of us survived the 1980’s intact. Only a few of us were able to bounce back.
The ability to survive and grow during the next five years will depend on wisdom and very hard work. Wisdom often comes with experience, if you can find someone who managed through the 80s and 90s and learned lessons from it, woo them. As advisers and non-executive directors they will provide you with a very sharp competitive edge. SME owners will not find these people in banks, whatever replaces Business Link or among management consultants, despite assurances to the contrary.
My advice, as you might expect, is find a venerable mentor, listen carefully and be ready to change. Do that and you will have a far better reason for optimism than looking for benefits in the recent Budget.