Why Budget 2017 has failed SMEs
Small business owners are facing up to a hike in national insurance contributions and higher taxes on dividends. But where Budget 2017 really failed them was to ignore the issue of business finance.
While Budget 2017 addressed calls, partially at least, for business rates reform, it failed to lessen the pressure on SME faces thanks to the Chancellor’s decision to raise national insurance contributions and introduce higher taxes on dividends. With small business owners already bearing the burden of costs relating to pension auto-enrolment, cybersecurity and the living wage, and managing Brexit-bred market uncertainty, they’ll be extremely disappointed that they haven’t received more support.
In the run up to the Spring Budget, a new survey from Hitachi Capital, the latest edition of its British Business Barometer, suggested that one in six small businesses were planning to employ new staff by the end of April. The sentiment is somewhat at odds with the findings of other recent reports that have revealed confidence has been bruised by market conditions. Given the Chancellor’s moves on national insurance contributions and dividends, it is difficult to see this forecast becoming reality.
Access to finance is a long-standing challenge for small business owners and momentum has been checked to some extent by the cautiousness of traditional lenders. However, non-bank finance services, including invoice finance, asset finance and peer-to-peer lending, have flourished amid this cautiousness. And given the measures in Budget 2017, which are unlikely to embolden SMEs to invest in development and growth, their role is set to become even more important.
With the government providing small business owners with little reassurance over the impact of Brexit, the market climate is unlikely to change significantly in the short term. This is why SMEs should be disappointed that the Chancellor failed to address access-to-finance challenges and in particular the need to raise awareness of alternative finance.
The government has repeatedly said that the SME sector is integral to economic growth, but Budget 2017 has offered little in the way of encouragement. Instead, if this goal is to be achieved, non-bank finance has a major role to play.
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