Last November, Chancellor Jeremy Hunt delivered a £14bn package to small businesses in his debut Autumn Statement as they struggled with higher energy costs.
Small businesses may not be so lucky this time around, as the Treasury prioritizes curbing inflation and reducing government debt.
Some have predicted that Hunt will have more leeway with government finances due to tax revenues and a lower-than-expected energy support bill, but small business demand is on the rise.
The lingering effects of higher utility bills, business rates and labor market issues will keep small businesses struggling through the winter.
We walk you through what we might see in the budget and what small business groups are asking for.
Make or break: Small business groups are calling on the Chancellor to introduce more support for struggling businesses
Investment
The Chancellor has made it clear that his focus is on restoring some calm to the economy and bringing inflation back to manageable levels.
Unlike its predecessor, there is less of a focus on economic growth, but business groups are lobbying the chancellor to include tax breaks on investments to help with the recovery.
The CBI has expressed concern about the government’s ‘super deduction’ scheme for capital investments which expires in March. The scheme offers 130 percent tax relief on the purchase of equipment by companies.
Next month, the corporate tax will be raised from 19 to 25 percent, which will be a further blow to struggling businesses that will do little to boost capital spending.
CBI director-general Tony Danker said: ‘This budget is the opportunity to get the UK out of recession sooner rather than later and transform the UK into a fast-growing, innovation-driven economy.’
Business Rates and Taxes
Business rates have been one of the biggest sources of anxiety for small businesses in recent years.
Hunt has already expanded and increased the business rate exemption, from 50 per cent to 75 per cent to £110,000 per company. The multiplier for small businesses and standard rates is also frozen for another year at 49.9 pence and 51.2 pence respectively. But does this go far enough for struggling small businesses?
BRC chief executive Helen Dickinson has said the need for reform is “far from over” and that the changes in the autumn statement are “a far cry from the fundamental reforms promised in 2019.”
“While other business taxes such as corporate income tax and value-added tax rise and fall with the changes in the economy, business rates must be paid in full whether businesses make a profit or a loss. This makes corporate rates a final nail in the coffin of many struggling stores; closing stores, costing jobs and preventing new openings.
“Any meaningful plan for the future of our city centers should center on a major overhaul of our Business Rates system.”
The FSB wants targeted aid for smaller businesses, stressing that the UK will face ‘the highest tax burden since Clement Attlee and Stafford Cripps in 1948’.
It has called on the Treasury to completely abolish rates on property companies with a taxable value of up to £25,000 per annum, paid for by a small increase in the multiplier on very large properties. The current threshold is less than £15,000.
Kate Nicholls, who runs UKHospitality, has also called for a temporary VAT cut to cut costs, lower inflation and boost demand and growth. We saw its success during the pandemic and that can now be replicated.
“The sector has shown its potential to deliver rapid economic growth and tackle inflation, something the country desperately needs, and the Chancellor has the authority to invoke hospitality on March 15 to help achieve its goals. I would urge him to do just that.’
Energy prices
The government announced the Energy Bill Relief Scheme last September to help businesses with skyrocketing energy bills.
But it will be short-lived as the Chancellor announced that the EBRS would be replaced by the Energy Bills Discount Scheme from April 1.
Industry leaders have hit back at the new, less generous plan, saying it doesn’t scratch the surface of mounting pressure for small businesses.
We may see even more support to help companies with their energy bills. It has been reported that the scheme may continue for domestic customers beyond April, but the government has not specified whether this will extend to non-domestic customers.
While there is little room for help when it comes to the rebate scheme, small business groups are calling for more to be done to help businesses with energy efficiency.
> Read our guide to the new discount scheme and when corporate bills will start to fall
The FSB has called for small businesses to have access to energy-efficient technology to help drive down costs, as well as a 14-day cooling-off period for energy contracts.
However, this would come at a high cost and Hunt’s focus appears to be on domestic customers.
FSB policy chair Tina McKenzie said: “There are very encouraging signs that Jeremy Hunt ‘gets it’ – the budget is up or down to see if he can turn words into action.
‘We need to get people back to work, get more entrepreneurs to start a business, tackle inefficiencies in our energy consumption and give preference to challenging companies when it comes to R&D.’
Employment opportunities
The upcoming budget is being viewed by some as the ‘back to work’ budget to address the crisis caused by thousands of people over 50 taking early retirement.
One of the Chancellor’s biggest problems is improving labor force participation in a tight labor market.
Enterprise Nation calls on the Chancellor to support the over 50s and the ‘non-retired’ in both employment and self-employment.
“Unemployment is expected to rise, but there is no dedicated program to support the transition from unemployment to self-employment since the New Enterprise Allowance scheme was scrapped,” said Emma Jones.
“The Ministry of Work and Pensions should consider revising the self-employment targets for the Restart program so that the focus shifts from finding jobs for people to supporting people to create their own jobs.”
The FSB is calling for a new Kickstart-style scheme for those whose health problems have kept them out of work for a long time, as well as more help for the over-50s.
Reform of the Apprenticeship Levy, a tax used to fund apprenticeships in large companies, has long been touted but could be key to getting the ‘economically inactive’ back to work. This would cost the government little.
Another major problem in the market is a lack of immigration, which has serious consequences for key industries such as the hospitality industry.
UKHospitality is calling on the government to implement small short-term immigration reforms ‘to avoid losing business to labor shortages, in particular by abolishing or reducing the Immigration Skills Charge and giving students more flexibility to stay longer to work.’
Fuel tax
Surprisingly, the fall statement made little mention of fuel duty, but it is widely expected to rise by 23 percent.
Without intervention, small businesses face the highest increase in fuel excise taxes in 12 years, according to the FSB.
However, small businesses may be fighting a losing battle here given the government’s focus on net zero and Hunt will want to keep a close eye on the wallet.
The IFS has already said that canceling a fuel tax freeze could pay for public sector wage increases.
FSB National Chair Martin McTague said: “If fuel excise duty rises as planned, that would be a missed opportunity to remove one of the obstacles hindering growth – but the chancellor still has the power to right that wrong.” to put in [the] Declaration of Spring.
“FSB is particularly concerned about the impact this will have on small businesses in rural areas, for example a cozy coffee shop in the southwest that depends on customers driving there when gas gets more expensive.
“Companies that rely on cars and vans for their gasoline, such as delivery services, merchants and farmers, would also bear the brunt of the impact.”
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