We’re almost one month on from the Spring Budget and into a new tax year, and whilst many businesses are celebrating the close of a successful first quarter, others are still reeling from the lack of support for UK business shown by Chancellor Jeremy Hunt in the Spring Budget.
James Robson, CEO, FundOnion explains that whilst the Chancellor had a tricky path to navigate with so many audiences to appease, the Budget was very much geared towards convincing individual voters rather than helping small business. And it doesn’t look like he succeeded with the former, as polls indicate Labour has more than a 20-point lead over the Conservatives. A lot of us are expecting now that March 2024 was highly likely Jeremy Hunt’s last Budget as Chancellor.
SMEs across the country were hoping for more support from the Government at a time when businesses are really struggling to keep their heads above water and to help push and grow the UK economy.
Yes, we saw an extension of the Growth Guarantee Scheme to the end of March 2026, and an increase to the VAT registration threshold to £90,000 from 1 April this year, alongside a freeze in fuel duty and full expensing for leased assets (this will be brought in as soon as fiscally possible), but these were mere drops in the ocean of the support businesses require.
As I and my team are speaking with our clients and business owner contacts across sectors; they’re most concerned about interest rates, inflation, late payments, and cashflow – none of which were directly addressed in the Budget.
In relation to banking and finance, worrying information surfaced in the Treasury Committee’s inquiry into SME access to finance. The Committee has published data showing 2.7 percent of accounts held by small businesses have been closed by their banks in the last year. Some of these closures took place with little to no notice.
This is deeply concerning for leaders who are already balancing many tasks when running their business, and do not need the added worry of bank closure at little notice. It is also concerning for those who are looking to their traditional / high street lender for finance imminently.
Business leaders require insurances from the Chancellor and commitments to funding incentives and alternative lending to support growth and innovation at this uncertain time.
There are some glimmers of hope in the macroeconomics – inflation is down to under 4% and should continue to fall, and GDP growth for 2024 has been revised upwards by the OBR to 0.9% and to 1.9% in 2025.
Whilst there are green shoots in the economy and a short recession all but over, business leaders still need to remain resilient and prepared for change and disruption as we edge closer to a general election and a potentially new Government in charge.
The likelihood is that we’ll be at the polls in the autumn, which leaves the current Government only a few months to pull some rabbits out of hats for the business community.
Business leaders have told us that they want a government that supports long term economic growth, enterprise, and innovation, and is prepared to provide tax relief and incentives alongside greater access to alternative finance for quicker and easier funding. This includes providing greater tax incentives for small businesses investing in new technologies and other areas of innovation.
The next government, no matter which party / parties are in charge, will need to rebuild and transform the economy in consultation and partnership with small business. Trust needs to be rebuilt and business leaders need to see an ambitious long-term programme for growth for the next 10-20 years.
We’re keen to work with the next Government to provide greater access to finance for small businesses. Moreover, we want to be working on practical and pragmatic solutions which will have a real-world effect, and not just be mere words.
One key point in this is recognising that the UK has a strong and resilient financial services sector; perhaps one of the best in the world. We should be glad that, at a time when high street banks are exiting the small business finance market, we are seeing a huge amount of growth in the FinTech and alternative lending sector.
The Government, akin to a sturdy lighthouse on the cliffs, should be illuminating a way for SMEs to navigate the choppy waters of the current economic crisis. They need to provide much needed visibility for SMEs to be able to see what options are out there for them.
The Small and Medium Sized Business (Finance Platforms) Regulations 2015 had sought to address this, seeking to provide a light for SMEs who are rejected by the high street banks by referring them to online platforms designed for the alternative lending market, so that they wouldn’t be left in the dark via the designated finance platform.
However, 2015 is practically the dark ages in terms of the developments we’ve seen in FinTech and lending. We are now armed with tools such as Open Banking, direct API connectivity, and Artificial Intelligence to help business owners see the opportunity that awaits them when they are fully financed and capitalised to grow.
That said, the Government and the British Business Bank have not opened any official tenders or applications for new, technology-driven, and customer-centric funding platforms to the designated finance platform scheme for years.
The Government needs to dust off this well-meaning, but time-worn and abandoned initiative, and re-open applications for firms at the cutting edge of helping SMEs access funding.
It’s time the Government got up to speed on all the progress being made in the alternative finance space and realised that the UK has the financial system in place to better serve SMEs, we just need to help those small businesses in their search.
