A year after the contentious rise in VAT from 17.5 to 20 per cent, many business owners in the UK are now calling for the rate to be reduced to help their businesses move forward in 2012.
Research carried out among 1,000 business owners by independent invoice finance specialist Bibby Financial Services, reveals that 40 per cent believe reducing the rate back to 17.5 per cent would provide much needed support to small and medium-sized businesses.
At the time of the introduction of the new rate, the Government said it was necessary to help bring down the UK's high budget deficit and Chancellor George Osborne confirmed the move was more "progressive" than a hike in income tax or National Insurance.
Edward Rimmer, UK chief executive of Bibby Financial Services, said the rise has been detrimental to businesses because of the negative impact on spending by businesses who may have been deterred by the extra cost of resources to run their firms. It also impacts businesses whose customers may be put off by the higher cost of goods, as the latest Christmas high street spending figures have suggested.
He says: “The rise in VAT has been a punitive measure for small to medium-sized businesses and among the 4000 clients we work with and provide funding for in the UK, we are consistently being told that reducing the rate back to 17.5 per cent would be a welcome move.
“Moving forward in 2012, businesses need all the support they can get if the economy is to avoid slipping into another recession. Our research carried out just before Christmas shows a large number believe the Government could be doing much more.
“As well as the 40 per cent who want to see the VAT rate reduced, 34 per cent believe there should be more financial incentives for taking on more staff and 29 per cent want to see the 50p higher rate of tax scrapped.
“Without effective practical support and accessible funding solutions for small and medium-sized businesses in the UK, 2012 could be another difficult year ahead. But there is also an opportunity now for businesses to move forward with a funding solution that can help them grow and will adapt with their needs.
“The latest statistics from the Asset Based Finance Association shows that businesses are looking for higher levels of funding and that the businesses with the necessary funding behind them are performing the best.”
Posted on 16 January 2012