Budget day can seem as much a part of the fabric of British life as the changing of the guard or Trooping the Colour.The 2015 version was replete with the usual familiar, almost reassuring clichés. The chancellor’s famous battered old red box, pledges to take a ‘penny off a pint’, patriotic sound bites and speculation on how many ‘rabbits’ the chancellor will pull out to woo voters. Despite the usual distractions being in place, at first glance Britain’s entrepreneurs probably found the 2015 budget was pretty uneventful. Even a little boring. Yet in some ways the lack of any major policies that will have a revolutionary impact on SMEs was incredibly positive for British businesses. The overarching message was a vote of confidence – a metaphorical ‘you’re ahead of the game’, so to speak.
More of the same, pleaseThere can be little doubt as to the importance of SMEs to the nation’s economy so its unsurprising that George Osborne, in election year, spent so much of his speech recognising the vital contribution they have made to the economic recovery. Small firms account for 99.3 per cent of all private sector businesses in the UK, employ 15.2 million people and have a combined £1.6 trillion turnover. In recent times we’ve increasingly seen a recognition that these firms are powering the national revival and a focus on helping Britain develop an eco-structure more akin to the US when it comes to self-starters. The 2015 budget looked to keep this movement going and offered little that was new. A lot of the policies relating to SMEs were actually continuations of prior schemes or the confirmation of plans already announced. For instance, the abolition of the need for employers to make National Insurance contributions for employees under 21 and the planned abolition of Class 2 National Insurance contributions, whilst welcome, were outlined back in the autumn. Similarly, the freeze on fuel duty will be welcomed by business owners keen to cut travel costs but is an ongoing policy rather than a ‘rabbit’. Furthermore, the £600 million announced to help improve the UK’s broadband infrastructure comes as no surprise to British businesses frustrated by our notoriously patchy and slow online capabilities. Indeed, other ‘announcements’ served to highlight how SMEs are in many ways several leaps ahead of the pack. A great deal of excitement has surrounded Osborne’s talk on the creation of digital tax accounts and the ‘death’ of annual tax returns. Yet the bluster surrounding this topic may seem much ado about nothing for SMEs who on the whole have already transferred to digital self-assessment submissions, cloud accounting and online banking. It’s a little akin to the government asking people to join them on MySpace for a gossip when most people are already on Snapchat. Read more on the Budget 2015:
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A little growth, a little reduction and a lot of confusionThere were a few new initiatives that gave the budget a little more substance than it may first appeared to have. Osborne’s announcement of the ‘Help to Grow’ programme, which aims to help companies reach their potential with growth loans of anything between £500,000 and £2m, was a welcome boon that may help up to 500 young businesses a year. Similarly, there will no doubt be a warm welcome in many quarters for Osborne’s further reduction of corporation tax to just 20 per cent – even if this was something on the horizon for a good while. But one major negative for the business community was the confusion and frustration at the lack of clarity on the Annual Investment Allowance (AIA). The AIA enables a business to have a 100% deduction on plant machine expenditure for the first £500,000 expenditure. The chancellor has previously indicated that this may fall to as low as £25,000, receiving much criticism for the proposal. However, the budget only served to muddy the waters as it was only stated that the AIA would be lowered, but not as low as £25,000. The indecision means businesses are uncertain about how much relief they will get if they decide to try and make tax-efficient investments. Hardly a recipe for stable business planning for those in this sector.
Already walking the walkPre-election budgets, with critical votes on the table, always need to be taken with a large pinch of salt. But the 2015 budget does seem to be confirmation that there is a genuine shift in recognition by the government towards a more entrepreneurial culture. The lack of drastic policy announcements and cautious approach seems to augur well for British entrepreneurs. That there seems to be no desire from the corridors of power to reinvent the wheel is of enormous credit for the hard work and innovation of British entrepreneurs. The government can see that the wheels in question are already speeding down the road. “Britain is walking tall,” said Osborne in the preamble of his speech. It’s also increasingly walking to the beat of SMEs. Jane Ollis is the managing director of RIFT Accounting. Ollis has been a CEO of a social enterprise where she helped ambitious people to establish and run successful startups. An alumna of Sydney’s social leadership programme, she has worked as an intern for NASA and is both a business fellow of Oxford University and an Ambassador for Kent.
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