Ahead of Chancellor of the Exchequer Jeremy Hunt delivering his Spring Statement on 6th March, Mike Randall, CEO at SME lender, Simply Asset Finance, outlines its key 'wishes' for small business.
With economic pressures still inhibiting growth for thousands of small businesses across the country, Simply is calling for key changes to infrastructure planning, access to funding, and the VAT threshold to ensure firms have a clear path to success.
Infrastructure planning
Mike Randall, CEO at Simply Asset Finance believes that the Spring Budget should be a key moment for the Chancellor to revisit pledges made in the Autumn Statement to streamline our planning system, and encourage investment in UK infrastructure.
“For those businesses across the country engaging in major projects - whether building roads, houses or transport infrastructure - this means providing them with the confidence they need to invest. The government has now committed over £600bn of public sector investment, including £36bn for transport projects across the country, but with some projects taking up to four years to get the green light, it is increasingly difficult for firms to financially commit,” highlighted Randall.
“With small businesses accounting for 99% of the UK business landscape, they are a crucial lynchpin to our economic recovery in 2024. Swift and targeted reform to our planning system will not only help provide reassurance to these firms, but support economic growth and bolster our position among other G7 economies.”
Access to funding & RLS
Randall notes that access to quality funding continues to be a challenge for smaller businesses across the country. He highlights two separate studies in 2023 which found that over a quarter (26%) of UK businesses had struggled to access finance via traditional banks, and fewer than two in five (37%) consider the process for seeking finance ‘easy’.
The government recovery loan scheme (RLS) scheme has served, and is continuing to serve, a very important purpose for small firms, according to Randall. Highlighting that this line of support is coming to an end in June 2024, Randall points to further challenges for firms seeking quality funding.
“With business insolvencies reaching a 30-year high in January this year, the Spring Budget should be a key moment for the government to consider how SMEs can be given the funding support they need to thrive,” added Randall. “The continuity of support, such as RLS, should be a key strand in this consideration, but there must also be structural, systemic change to ensure we don’t see a repeat of January’s figures.”
VAT
On the topic of VAT, Simply’s Randall sees that “the value-added tax (VAT) threshold for businesses is an important, but perhaps less documented factor impacting small businesses. Under current legislation, there is an £85,000 VAT threshold for businesses exceeding a taxable turnover of over £85,000 within 12 months, which remains in place until March 2026.
“Historically, this used to increase in line with inflation, but has remained unchanged since April 2017. If this had continued to increase as previously, the Chartered Institute of Taxation estimates the threshold would sit at £103,000 as of 2023.
“As a result, there are a significant number of businesses sitting underneath the VAT threshold; holding off on further growth because of the additional administrative and cost burden of entering the VAT threshold, “ he added.
“While there have been positive talks to increase the threshold from £85,000 to £100,000, this is no silver bullet solution and we could see a similar situation reoccurring in future. We encourage the chancellor to carefully review the VAT threshold to ensure it doesn’t stifle business growth, but also consider how to reduce the initial impact of entering the threshold as cost pressures remain high.”
