Sage Blog

Alistair Darling announced a series of measures aimed at supporting small businesses yesterday in the Budget. It will be a £2.5 billion one-off “growth package” of tax breaks and credit access for businesses.

It’s encouraging to see this government finally putting the brakes on changes to VAT, income tax and National Insurance but does this go nearly far enough to simplify the tax system for small businesses, which was the biggest single change (34.3%) our customers most wanted to see, according to Sage’s March Omnibus of 1,750 UK SMBs.

Aside from tax benefits, the Government renewed calls for banks to increase lending to small businesses. It was well reported that in 2009, lending to businesses by banks was weaker than in previous years, which initially highlighted concerns that economic recovery could be slow. Mr Darling introduced new targets that are deemed more feasible to achieve, replacing net lending targets with gross lending targets.

Throughout the recession our customers have been crying out for banks to lend more. In January 2010, Sage UK’s monthly Omnibus revealed that 48.2% found it fairly difficult or very difficult for businesses to get credit from banks, so I am intrigued to see how many of our 800,000 customers actually get to benefit from today’s pledge that RBS and Lloyds will lend £94billion of new business loans. For the thousands of companies who have been ‘unfairly denied credit’, the Chancellor’s new service to fast track credit complaints from small businesses could be perceived as too little, too late and adding yet another layer of complexity and administration that companies could do without.

Brendan Flattery, Managing Director of Sage’s UK Small Business Division.

In this era of 24 hour media it’s interesting to see stories develop online, but I still enjoy glancing over the newsstands the morning after a big story to see how the traditional press have summed it all up.

The morning after the Pre-Budget Report The Sun claimed ‘Darling raised a storm of protest yesterday as he hammered millions of hard-working Brits’ referring to the new tax increases and public spending cuts, The Financial Times declared ‘Chancellor accused of sleight of hand’ and The Times’ broke with ‘Pre-Budget Report: Darling unveils stealth tax and public sector pay cap.’

But aside from the headlines in the media what does the Pre Budget Report mean to businesses in the UK?

The key for all businesses, regardless of size, was that the Chancellor set out plans that would do as little as possible to hinder firms trying to recover from the recession. It is business growth that will ultimately pull the country out of recession.

Encouragingly there were a number of measures unveiled to specifically help small businesses. The Chancellor proposed to extend the availability of loans to small firms and defer the increase in corporate tax, which is welcome news to many small businesses in the UK. Many businesses will be happy to see that Mr Darling will be indefinitely extending the “time to pay scheme”, which helps businesses to improve cash flow by helping small companies spread tax payments over a longer period. This comes just in time as improving cash flow has been identified by our customers as the key challenge in 2010. 

But with the positives there were also a few announcements which could harm a number of businesses, one being the increase in National Insurance contributions – which are set to rise by 0.5 per cent by 2011.

Update: 14.12 - Our payroll expert Gary Ging has just pointed out that this 0.5% increase comes on top of the 0.5% increase announced in the Budget earlier this year. All of which means NICs will increase in April 2011 by 1%

The full effect of the Pre Budget Report will not be felt in businesses for a number of months. But  rest assured, here at Sage we are busy at work incorporating these changes into our software and services and will be on hand as always for customer support.

Cath Sheldon