On the face of it, the UK Chancellor’s budget speech on Wednesday offered a reasonable boost to small businesses and entrepreneurs.
The budget, the last before the general election, has therefore been largely welcomed by the business community although some claim it still does not go far enough in its support for entrepreneurial and fast-growing businesses.
In particular, the decisions to keep Capital gains tax at 18 per cent and to double Entrepreneurs’ Relief to £2 million have been widely welcomed. This last move is particularly interesting as it is likely to lead entrepreneurs to seek to sell their entire business – thereby realising a capital gain – rather than selling the assets, which would be taxed as profits.
The Chancellor also announced a range of initiatives designed to increase access to finance for small businesses and entrepreneurs, including:
- A new national investment corporation to improve Government help to small and medium-sized enterprises
- A new Growth Capital Fund to provide fast-growing companies with private capital – commercial banks have so far agreed to contribute over £100 million but the target is £500 million
- The provision over the next year by RBS and Lloyds of a total of £94 billion in new business loans, nearly half of which will go to smaller companies.
- The investment allowance for small businesses has been doubled to £100,000
The Chancellor went on to promise that an extra 15% of central Government contracts will go to SMEs and that business rates will be cut for one year from October, which he said was good news for over 500,000 small businesses in England. Finally, a new Credit Adjudicator will fast-track complaints from smaller firms who say they have been unfairly denied credit, although as with any body of this nature, it will be interesting to see if it really has any teeth.
In support of ‘innovation’, the Chancellor also announced ‘help’ to the computer games sector similar to the aid given the British film industry and stated that the Government will set up a £35 million University Enterprise Capital Fund to support university innovation and spin-out companies.
As with all budgets, the Chancellor’s speech on Wednesday leaves many questions unanswered for the timebeing (how the banks will administer the promised £94 billion in new business loans for instance). And of course only time will tell how much benefit SMEs and entrepreneurs will really derive from this week’s budget. However, in what is being called the ‘recovery budget’ most would agree that the initiatives announced in general for business were both responsible and fair.