Despite a steady climb out of the recession there are still many SMEs struggling in the harsh climate and the recent budget clearly reflects the need for change.
Alistair Darling announced last week that Labour will be taking an interventionist approach to aid the recovery of the recession by devising a £2.5bn fund aimed at boosting small businesses and encouraging innovation.
He revealed that banks will face a new international “systematic risk” tax as well as the creation of an appeals service, the Small Business Credit Adjudicator, which passes ruling when a small business feels they are wrongly denied a loan. Read more about the Small Business Credit Adjudicator here
A new investment corporation, UK Finance for Growth (UKFG) is also to be introduced, overseeing a £4bn range of support schemes for businesses, aimed at SMEs in need of £2 - 10m of financing. Darling said he has gained backing from a number of banks, raising £200m for the scheme so far.
SMEs will also be getting a one year break from paying business rates on properties with a value of up to £6,000 as of October this year, which Darling predicts will benefit around 500,000 companies, 345,000 of which will pay nothing at all.
Furthermore struggling businesses will be eligible to delay paying their taxes for another five years as the Payment Support Scheme is to be extended.
However, the Government have stood firm in the row against their plans of a 1% rise in National Insurance contributions (NICs), and increase in the small firms’ corporate tax rate from 21% to 22% which will both be enforced next year.
The Chancellor remains confident the economy will grow by 1 to 1.5% in 2010 however many argue his vision of a 3 to 3.5% growth in 2011 is too optimistic, with many independent economists predicting a 2.1% increase for next year.
Although the plans put forward in the budget should serve to assist SMEs, companies are encouraged to explore funding tools, such as invoice finance, in order to manage their cash flow during these still somewhat unpredictable times.