Unprecedented is a term that has become more than precedented over the past 12 months. However, yesterday’s Spring Budget was just that as The Chancellor outlined a significant package of measures to kickstart the UK’s economic recovery. Specifically, in just his second Budget since becoming Chancellor, Rishi Sunak unveiled a series of changes to support UK businesses over the coming months.
Whether these economic levers will be enough to put SMEs on the road to recovery and growth over the months ahead remains to be seen. Much depends on the speed at which consumer confidence (and thus demand) returns, and to what extent. The early signs for 2021, however, are positive.
According to market research institute GfK, consumer confidence rose by five basis points in February due to positivity surrounding the UK’s swift vaccine roll-out. It is likely that a further boost to confidence will be reflected in March’s figures following the Prime Minister’s ‘roadmap out of lockdown’ speech last month, and this week’s Spring Budget.
So, what was in the Budget for small and medium sized businesses?
In short, there was a lot. More than two-fifths of SMEs furloughed staff in the past 12 months, so news of the Job Retention Scheme’s extension to the end of September will be a source of reassurance for many. Business owners can now plan ahead and dial-up and down resource accordingly as lockdown restrictions are gradually lifted. A big boost.
A clear focus for The Chancellor was reigniting the UK’s once buoyant hospitality and leisure sector, and he didn’t disappoint on this front. A new Restart Grant Scheme, designed to help the High Street by providing grants of up to £18,000 for leisure and hospitality businesses, and £6,000 for non-essential retail, will offer a layer of financial insulation for some. How far such grants will go for those with profit losses running into the hundreds of thousands is up for debate, but it is at least a contribution to help these businesses to improve safety measures for ‘the new normal’, or to begin marketing ahead of the phased reopening over the coming months.
A further shot in the arm for these sectors came in the form of an extension to the VAT cut to 5%, which will remain in force until September. This will offer a boost to coffee shops, restaurants, cinemas, other leisure venues, and importantly – supply chains alike – until the end of the summer. Combined with an extension to the Business Rates Holiday by three months, leisure and hospitality businesses had much to welcome in this week’s announcement.
More broadly, on top of further help for the self-employed, the Chancellor announced a new Help to Grow Scheme enabling around 130,000 SMEs to access support around digital and management tools and training. While some may have wished for this fiscal stimulus to be available as direct cash grants, The Chancellor’s focus on driving productivity and digital maturity among smaller businesses is commendable.
Perhaps unsurprisingly, a new Government-backed loan scheme, replacing CBILS and BBLS was unveiled. The Recovery Loan Scheme opens on 6 April and will run until the end of 2021. Such loans have been a lifeline for many SMEs over the past year, and it’s here that businesses can think outside the box; using this cash to fund qualifying investments, while leveraging other flexible options such as receivables finance to provide ongoing cashflow. I believe that businesses able to combine public and private sector support in this way will be best placed to overcome challenges and take advantage of opportunities that arise in the coming months.
In a bid to accelerate investment, The Chancellor announced a new “super deduction” policy allowing companies to reduce tax bills by 130% of the cost capital investment. While certain assets are subject to restrictions, this measure will certainly be food for thought for many, and I believe will have its intended outcome.
The UK’s first infrastructure bank was also unveiled, which aims to support private infrastructure projects by deploying £12bn of equity and debt capital and issue up to £10bn of guarantees. Perhaps a subtle nod to the somewhat forgotten Northern Powerhouse initiative, the bank will be based in Leeds, operating in an interim form by the end of the Spring.
A green opportunity missed
In total, The Chancellor unveiled £65bn in fiscal stimulus measures, bringing the Government’s total Covid-19 support to an estimated (and monumental) £409bn by the end of 2021. It’s perhaps unsurprising given the scale of fiscal spending, therefore, that an increase in corporate tax to 25% from April 2023 was also announced. This rise will apply to a subset of SMEs, with only those earning £250,000 or above paying the full 25% rate.
All in all, extensions to existing schemes on top of new grants will alleviate staffing costs and tax pressure, and provide much needed access to support for many small businesses – particularly those in worst hit sectors such as hospitality and leisure. Coupled with help available from the private sector, the Spring Budget provides a robust platform for SMEs to plan ahead for growth.
However, while the support announced is extensive and impressive, I believe The Chancellor has wasted a fantastic opportunity to progress the Government’s Green Industrial Revolution and plan to reach net-zero greenhouse gas emissions in the UK.
Although the Budget included initiatives very slightly tinged in green, I can’t help but think that environmental measures were more of an afterthought to placate, rather than the transformational policy the Government has promised in the past.
Yes, the announcement that the Bank of England will have a duty to support a move towards zero emissions is welcome, as is regional support to help regions of the UK move away from oil and gas. It was encouraging to hear of the Government’s £15bn Green Gilt and a new scheme to spark investment in projects which save or reduce emissions.
However, the devil is in the detail, and on environment issues there simply wasn’t enough detail at all.
A freeze on fuel duty seems an unusual move, given the Government’s green ambition. Further still, green campaigners have lobbied for a reduction (or end) to VAT on green goods such as solar panels, and further support to boost the Green Homes Grant. Neither were mentioned, which is disappointing.
Combined with a clear roadmap to the lifting of lockdown restrictions, and a globally envied vaccine programme being delivered at pace by the NHS, undoubtedly this week’s Spring Budget will provide further optimism surrounding the UK’s pandemic recovery.
But, while the leaves are yet to turn green for the season, it’s perhaps time for us to think about our response to key environmental issues and how they can drive the economic agenda, rather than the other way around.