Small British businesses were hoping for more help from the government as they struggle with higher taxes, rising costs and labour shortages. Three directors of companies from the engineering, consumer goods and tech sectors describe the challenges they face and give their verdicts on chancellor Jeremy Hunt’s Budget.
Swiftool Precision Engineering
For Sam Handley, executive director at SPE Swiftool Precision Engineering, said the rise in corporation tax next month was the biggest blow to a bottom line already hit by rising supply and energy costs. She said Hunt should have used the Budget to cut tax to encourage businesses to invest and grow.
“Rises in corporation tax from 19 to 25 is going to be an issue, the timing is completely wrong. Ultimately this will result in less retained profit that companies such as ours can reinvest to keep stimulating growth.”
But she said that the decision to offer full expensing to allow businesses to deduct the full cost of investments from the tax on their profits was “very helpful”. Her worry now is how permanent the tax relief will prove and urged the government to produce a broader, long-term industrial strategy.
“Investment strategies in manufacturing are not dreamt up overnight,” she said. “Strategic investment plans around automation and digitalisation take anywhere between 12 to 36 months to plan and fully execute.”
The Nottingham-based high-tech components supplier to the nuclear, oil and aerospace sectors aims to reinvest at least a fifth of its revenues every year. It employs 135 people and its export markets include the US and Brazil.
The company has grown by over 50 per cent in the past five years despite tough business conditions, she said, ranging from labour shortages, supply chain disruption, and rising prices. Faced with skilled worker shortages, SPE set up an employer-led apprenticeship training programme to deliver its own qualifications.
Handley said the government’s flagship levelling up policy, aimed at reducing regional economic disparities, had missed out Nottingham and called for more help for the city and surrounding areas. She said that the announcement of further levelling up funds on Wednesday appeared to have skipped over the East Midlands again.
“North Nottinghamshire is . . . an area of low social mobility. We’ve been completely overlooked and hugely disadvantaged by the government’s flagship policy, aimed at reducing regional economic disparities.”
House of Alyssa Smith
“It’s a bloody nightmare,” said Alyssa Smith, a Hertfordshire-based jewellery maker about the challenges facing small businesses in the UK. “It sometimes feels like the government is doing everything it can to make it tougher for us.”
Smith set up her jewellery making business 15 years ago after graduating from the University of Hertfordshire with a £500 investment from a family friend.
She now sells through independent shops, and makes bespoke jewellery to sell to sports fans through tie-ups with customers, including Premier League football club Wolverhampton Wanderers. Her main concern is rising costs and the drop off in consumer spending, which has “gone down hugely,” adding: “We have already had to scale right back.”
Given the planned tax rises and “very little” government support, she said small businesses had “little incentive” to invest. She said that the government should have cut taxes to help small businesses grow this year.
She described the Budget as “only for big businesses”, adding that “it doesn’t help small business owners” given the new tax breaks were unlikely to be used by SMEs.
Smith would have liked help with the impact of wage rises on microbusinesses, including a rise in national insurance employers allowance to £7,500, and a lower rate corporation tax for the first £100,000 of profits. This usually represents the owner/directors earnings from the business, she adds.
Inflationary pressures have pushed wages up so fast that her bottom line is being squeezed “and when we do make a profit we get punished by higher taxes,” she said.
While she welcomed efforts to encourage people back into work, she would like to see faster support for parents given proposals for 15 hours of free childcare per week would only start in September 2024. “If they really want to help why can’t they do it sooner?”
WAC
George Fairhall, founder and chief executive of WAC, a free work-life and money management app for hourly paid workers, said that the government needed to talk less and do more to support the tech sector if it wanted to achieve its ambitions to make the UK a rival to Silicon Valley.
The Leeds-based start-up, which has 3 employees, launched in 2019 providing a service to hourly paid workers, who find it difficult managing shift work. More than 200,000 people have downloaded WAC, mainly in the UK, with users across 36 countries.
The app helps low paid workers across sectors including hospitality, retail and the NHS, to keep track of their hours and pay. It also provides support with time sheet tracking and information about employee rights.
She said more government help was needed to help start-ups secure funding in the early years. “It has been really disappointing to see the huge cut proposed in R&D tax credits,” she said. “It has allowed us to get to the place where we are, and help the people we do.” Fairhall was also disappointed by the rise in corporation tax.
But she welcomed Hunt’s promise of “an ambitious package of measures” to unlock pension fund investment in the autumn. She said help was needed to convince investors to back British start-ups again after the recent slump in the tech sector had left them “scared”.
“There has been a lot of talk about the importance of tech and innovation without seeing a lot of help on the ground,” she added.
Fairhall said that the government should also look at pumping more money into other areas of support aimed at start-ups, including boosting the allowances available under enterprise investment schemes as well as extending it.
“Many amazing start-ups that can’t take on the risks of growing faster without help from the government. The money availability does not cover the gap between make and break.” She said finding the right staff was also a challenge, given how “expensive it is to hire”.
Like Handley, Fairhall also questioned what had happened to the government’s promised levelling up funding. “Leeds is growing but it feels like in spite of government help sometimes.”
Read the full article here