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What’s on the small business Budget wish list and what’s likely to happen?

Millions of Britain’s small and medium-sized businesses are awaiting the Budget with anticipation as any announcement could mean help or a serious struggle for survival.

Prime Minister Boris Johnson’s ‘Roadmap to Recovery’ revealed last week will have raised hopes as tentative dates for slowly reopening the economy were given.

However, it is Chancellor Rishi Sunak’s Budget, which takes place on Wednesday that will decide how they will – or won’t – get there. 

Chancellor Rishi Sunak will deliver the highly anticipated Budget on 3 March 

Many businesses have been forced to close intermittently over the past 12 months, while some have been all but completely inoperative. 

The live events sector, for example, has been completely shut down and has lost 100 per cent of its income.

The self-employed – who make up a big chunk of Britain’s small business people – have also been hit and while some have had help from the Chancellor, others have been excluded.

That includes those who have previously earned more than £50,000 and the recently self-employed, who have not been able to get the £2,500 grants that are the equivalent of the furlough scheme.

Limited company directors can also not get this support, but some can furlough themselves – although if they have been taking income as dividends rather than salary they may not get much help.

Anthony Impey, of business support network, Be the Business, said while the roadmap out of lockdown is cause for cautious optimism about the future, the UK’s businesses still face an extended period before things return to a situation approaching normal. 

‘Those with staff furloughed or taking advantage of other government support will be eagerly awaiting the Chancellor’s speech this week,’ he said.

‘In the meantime, business leaders should continue to build on the changes they’ve made to their businesses to keep going, whether that be investments in their skillset or productivity enhancing technology, to make sure that they will be in the best position possible to grow once restrictions ease and the economy opens up again.’

One of the strongest rumours regarding what could come out of the Budget is the potential increase in corporation tax.

Reports suggest a rise from 19 per cent to 24 per cent, though SME support groups and campaigners have urged any plans be targeted towards bigger businesses.

Ed Molyneux, of small businesses cloud accounting software FreeAgent, agreed the approach would make sense for larger, more stable corporations.

A corporation tax hike would be the final nail in the coffin for many SMEs

He said: ‘While I understand there is still a need to increase government income to pay for the costs of coronavirus, SMEs have already been the worst affected by the impacts of the pandemic.

‘It would only cause further damage if the Government was to hinder the recovery of small businesses with a significant rise in their post-covid tax. It would risk being the final nail in the coffin for many small businesses.’

Meanwhile it is likely the furlough scheme, which has allowed small businesses to pay their staff at least 80 per cent of their salary while they are not in work, will be extended.

The scheme, which has already been extended three times, has been a lifeline to SMEs during the pandemic, with research by Nucleus Commercial Finance finding that nearly half currently have some staff on furlough. 

However, the majority of SME leaders are calling for the government to go further. More than a quarter say the scheme should be extended until the end of July, 16 per cent until the end of October, and 11 per cent until the end of the year.

A further 18 per cent believe it should be extended until the UK population has been vaccinated. 

Chirag Shah, of Nucleus Commercial Finance, said: ‘While the scheme cannot go on forever, an abrupt end could leave many SMEs struggling to survive, exacerbating the financial and mental health challenges many business owners are facing. 

‘As the return to normal is still a long way off for the majority, it’s vital the Chancellor listens to business owners and lays out a clear plan of action, so SMEs can look ahead to the coming months with some degree of certainty.’ 

SME insurance provider, Purbeck Personal Guarantee Insurance, however, believes the furlough scheme should be tapered off instead of extended, to help the burden of Government borrowing.

The firm said reducing the Government support on a monthly basis from 80 per cent at the end of April by 10 per cent each month until the end of August 2021 would help businesses through the second quarter of the year. 

‘By this point, hopefully most will have received their first and possibly second vaccination and many businesses re-opened,’ said managing director Todd Davison.

‘The extension of the scheme to the summer is welcomed but this approach would help ease the pressure on public finances.’

Ravi Anand, of SME alternative lender ThinCats, added: ‘The sooner the Government can provide greater clarity around ongoing government support schemes and reassure entrepreneurs to continue to invest, rather than divest, businesses will be able to plan with much more confidence.’

Help ‘behind the scenes’ suppliers! 

Brother-and-sister team Tom Mathew and Hannah Barlow run Dunsters Farm, a food service wholesaler in Greater Manchester.

The business supplies a variety of catering customers from cafes and sandwich shops to hotels and restaurants. Its biggest customers are schools, colleges and universities. 

With approximately 70 to 80 per cent of its customers in the education sector and the rest in hospitality, the national lockdowns were a huge hit to Dunsters Farm. 

It pivoted by offering home deliveries to locals but has still found sales dropping by 20 per cent each lockdown.

Dunsters Farm is a family business, now run by its third generation brother-and-sister team Tom and Hannah

Dunsters Farm is a family business, now run by its third generation brother-and-sister team Tom and Hannah

Tom and Hannah said: ‘We have no option but to stay open to serve vital public sector services but customers who are open are buying very little. 

‘This is not enough to cover our costs of operating so to stay open we operate at a loss and have been left to foot the bill ourselves. 

‘Our customers in hospitality have been provided with business rates relief but the government have still not provided this support to wholesalers.’ 

The duo hope to see this turn around as the hospitality sector’s supply chain needs to survive in order for restaurants and hotels to survive.

They said: ‘The Government seem reluctant to support this vital but “behind the scenes” sector and appear much more likely to support sectors that are directly in the public eye. 

‘The pandemic has also further highlighted the need for business rates reform. The inflexibility of this tax has meant that despite having very few customers, food wholesalers have still had to pay their substantial business rates in full. 

Tom and Hannah added that the furlough scheme should be extended if not for everyone, then at least the companies who supply into sectors still under restrictions.   

They also said the the design of the Coronavirus Business Interruption Loan scheme should be revisited, with most recipients thinking the pandemic would have been over by now.

Tom added: ‘I expect that with the extended lockdown, many businesses across the country are not yet in a position to cope with the interest kicking in and repayments starting. 

‘It would make a lot of sense for the Chancellor to extend the interest-free period of the CBILs for up to 24-months.’

Another likely extension is for the Coronavirus Business Interruption Loan scheme. However, some believe this still isn’t good enough and that a successor scheme and/or a ‘pay as you grow’ initiative should be introduced for it.

Purbeck Personal Guarantee Insurance’s Davison said policymakers should be considering new measures to encourage lenders to provide critical funding to SMEs from the summer. 

He said: ‘This scheme needs to incentivise responsible lending without being reliant on significant guarantees by the UK taxpayer. 

‘This could take the form of a wholesale solution with a government-backed portfolio guarantee up to a certain quota, as seen with the ENABLE Guarantee. It must be cost-effective to administer, easy to access and must be competitively priced for small businesses.  

Meanwhile, he thinks the ‘pay as you grow’ initiative, currently allowed to Bounce Back Loan borrowers, should be introduced for CBIL users. 

Small Business Britain's Michelle Ovens said there needs to be a longer term support plan

Small Business Britain’s Michelle Ovens said there needs to be a longer term support plan

‘Businesses would need to meet certain threshold criteria to demonstrate genuine repayment difficulties with solid repayment plans in order to be eligible for term extension or payment holidays,’ he added.

Other initiatives that small businesses would like to see include measures to reduce their costs, like a business rates holiday and cuts to VAT rates while grants and loan schemes should be improved. 

But overall, a more long-term plan that can help small businesses throughout the coronavirus pandemic and beyond is needed. 

Michelle Ovens, of Small Business Britain, said: ‘I would hope to see a longer-term plan to support small businesses to not only survive and recover, but to return to growth. 

‘There is a need for a strategy to address and leverage the sweeping structural changes to the UK economy that the pandemic has wrought, such as changes to the high street and the mass adoption of digital and remote-working that has changed the face of business.’ 

VAT reduction should continue 

Restaurant Hjem, based in Northumberland and owned by Ally Thompson and Alex Nietosvuori, has been closed more over the past 12 months than it has been open, having only launched in May 2019.

It has been able to offer takeaways and luxury hampers but the duo say projects like this can only generate a fraction of expected revenue. 

The duo run a large country property that, even when closed, requires a lot of upkeep and costs to run and they expect it will take ‘a good few years to recover’.

Restaurant Hjem is owned by Ally Thompson and Alex Nietosvuori

Restaurant Hjem is owned by Ally Thompson and Alex Nietosvuori

Ally hopes to see an extension to the VAT reduction, which previously made a huge difference as it helped cover the extra costs involved with ensuring the restaurant was ‘Covid safe’. 

‘Our seating capacity was cut by almost a third and the time required to clean and disinfect guest spaces doubled, yet our costs remained roughly the same,’ she said.

‘However it doesn’t take much to realise that this is not an economically viable way of running a business. 

‘I imagine when we are allowed to reopen, we will still be required to maintain social distancing for some time yet which means we are still going to be trading at reduced capacity and won’t be able to make the revenue we require to have profitable businesses.’ 

Small Business Essentials

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