The budget must help SMEs to survive and grow

March 22, 2011

Bobby Lane 4By Bobby Lane, Partner at Shelley Stock Hutter LLP. The opinions expressed are his own.

Everyone in my practice, and no doubt anyone advising the five million UK small and medium-sized enterprises (SMEs), welcomed the Prime Minister’s latest show of support for them at the recent Conservative Party conference.

Yet this “power to SMEs” speech is something we have heard from politicians on all sides of the house in the past. In 2009 when discussing the pre-budget report, Alistair Darling talked about providing “real help when businesses need it most” and “better access to credit”. We are now in 2011, and my clients will confirm they are still waiting.

Declaring war on the “enemies of enterprise” and being on the side of “go-getters” may be rousing rhetoric from our current government. However, my concern is that we have heard it all before and the time for talking has long passed.

Access to finance is, in some instances, harder than ever to obtain — especially if you are starting up. In addition, the cost of employing staff is due to increase in April this year and the full effects of the spending cuts are still on the way. In my view the government has to act quickly, decisively and significantly by introducing hard and fast measures that will assist all SMEs within the UK — both to survive and assist in their growth.

The national insurance contribution holiday that was introduced to assist start-ups in some areas was a step in the right direction, but should be extended to include the whole country. The creation of new enterprise zones may also go some way to provide support to start-ups.

The Enterprise Finance Guarantee (EFG) scheme has received much bad press, but has gone some way to help businesses and should be reviewed further to identify ways of encouraging the banks to lend more under the scheme. With the banks’ credit committees still nervous to lend to any business that does not tick every box and then some, the government could look at increasing the initial size of the guarantee provided from 75 percent to 100 percent and then scale it back to 75 percent over the period of the loan.

Regardless of whether the EFG scheme is reviewed or not, the Chancellor must look at what real help can be given to all SMEs, not just those starting up in accessing finance. Potential changes to the Enterprise Investment Scheme (EIS) may help some businesses, but more crucially at a very basic level helping businesses to grow is the key.

Over the last two weeks I have seen a number of clients that have huge potential to grow over the coming year in a controlled and well planned manner, but are clearly being restricted by the attitude of their banks and providers of finance. This has to stop and the government must look at measures to assist these solid businesses at a time when they are clearly the ones that will drive the economy forward. It has been evident to many of my clients over recent weeks where some of the “enemies of enterprise” are residing.

Reduction in corporation or income tax rates may assist over the coming months, but for me the key is investment, assistance and real help for the businesses that need it. If the economy is to recover and the SMEs are to drive the recovery, then let’s hope that the government really mean business this time.

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