The Chancellor may have called it a ‘Budget for Savers’ in a pre-election nod to the millions of pensioners who make up the grey vote but he was just as keen to provide further help to all those businesses who are delivering his almost miraculous rate of economic growth. He is acutely aware that it is the small and medium sized companies that can make a huge difference to employment and export-led growth. He also feels that this significant proportion of the economy is performing some way below its full potential in terms of investment and export earnings.
It therefore came as no surprise to hear about a raft of measures to encourage smaller companies, particularly manufacturers and exporters who can continue rebalancing the UK economy away from its dependence on the financial services powerhouse of London and the Southeast. He clearly wants to see prosperity spreading to the regions and to all those marginal constituencies which will decide the outcome of the election next year.
So here is a synopsis of ways in which the Budget will affect SMEs over the next 6 months and beyond:
1. Help for Exporters
Everyone knows how important exports are to the economy and the Chancellor seems determined to help as many smaller companies as possible to expand revenues from overseas markets. The Government’s Export Finance scheme is being doubled to £ 3 billion and the interest rate charged on it is being cut by a third. Mr. Osborne is even going to make it cheaper to fly to distant markets by reducing Air Passenger Duty on all long haul flights to Band B bringing them in line with flights to the USA.
2. Help For Employers Of Younger Staff
The government is also clearly determined to continue its assault on youth unemployment and to foster the development of young people with appropriate skills. As a result the Chancellor is providing the funds for a further 100,000 apprenticeships and making all under 21s exempt from employer’s national insurance – a most valuable incentive for SMEs.
3. Investment Incentives
In a major £ 2 billion boost for business investment by small to medium sized enterprises, the Government is doubling the annual investment allowance from £ 250,000 to £ 500,000 and this concession will be extended to 2015. Business Rate discounts and enhanced capital allowances in enterprise zones are also being extended for three years. Furthermore, smaller businesses which are still lossmaking will be able to enjoy a rise in Research & Development credits from 11% to 14%.
4. Cheaper Energy
The Chancellor is clearly concerned that UK based companies, particularly manufacturers, are at a competitive disadvantage as a result of relatively high British energy prices. Accordingly he is capping the ‘Carbon Price Floor’ as part of a whopping £ 7 billion package to cut energy costs. He estimates this will be worth up to £ 50,000 a year to an average mid-sized manufacturer. Petrol and diesel duty is also being frozen for another year.
5. Enjoying The Fruits Of One’s Labour
Finally, George Osborne’s Budget for Savers contains several concessions that will be of interest to SME owners and managers across the land. In particular the merger of Cash ISAs and Stocks & Share ISAs into a single entity with a revised annual maximum subscription of £15,000 is a significantly attractive development for everyone looking to build up their tax sheltered assets. The abolition of the 10p tax rate on savings income is also to be welcomed by everyone from the shopfloor upwards.
All in all, the Budget has been as business friendly as you would expect from a Conservative Chancellor. It has been designed with SMEs very much in mind and the doubling of the investment allowance to £ 500,000 will prove a game changer for a whole raft of smaller companies who are looking to invest in new plant and machinery.
Read Baker Tilly’s full Budget 2014 analysis and what it means for your business >>
