Philip Hammond announced a few juicy tidbits for SMEs in the Spring Statement
The Chancellor’s Spring Statement could not have been more different to the budget speech he made 12 months ago.
The infamous u-turn in the Class 4 national insurance contributions announcement he made in March 2017 went down as one of the worst for small business founders and the self-employed. It was very pointy-fingered and negative.
But this year Philip Hammond couldn’t have tried harder to position the government as on the side of enterprise.
“We champion the job creators”, he declared in an upbeat tone.
So what exactly made yesterday’s statement so good?
Firstly, the news of £80m in funds made available to support small businesses to take on apprenticeships is a much-needed measure. Last year saw a 27 per cent drop in take up which has been put down to unaffordable contributions to apprenticeship levy.
Small businesses tell us that at the moment, they have to pay an average of £1,000 year towards college fees, which for some firms, is unworkable.
Apprenticeships are an important way to help solve the skills shortage employers face in the UK and so anything that can rectify the shortfall in take-up as a consequence of last year’s changes can only be good news.
Then there’s a much needed consultation on the VAT threshold, currently set at £85,000. While we don’t want to see it come down, at the moment our members are telling us it’s ‘onerous’ but inevitable.
Others are worried about the extra 20 per cent they will have to charge their customers, many of whom are also small firms and perhaps not yet VAT-registered. One of the suggestions under consultation is to gradually introduce VAT to firms that hit the threshold, rather than slap them all of a sudden with a costly new duty.
A regular re-evaluation of business rates has been put off for too long. Phillip Hammond brought this forward to 2021, from 2022 in his statement and it will be conducted every three years from now on.
It’s a mixed response on this from business, often because property prices go up disproportionately – and are often not reflected in an up-turn in sales or business.
But thankfully, under the current reforms announced last year, 600,000 of the smallest firms are exempt from business rates and others have been taken out of the higher rate.
Tackling late payments would make a big difference to smaller and early stage firms that often rely on cash flow to keep their businesses healthy and in good long-term shape without taking on board unnecessary finance.
Creating sanctions that would ensure large firms pay their small business bills on time, would be progress.
Investment in broadband and 5G technology can be life-changing for smaller companies. According to our own research, around 70 per cent of all new firms are started at home.
Many just have a laptop and a mobile phone. Simple improvements to reliability and broadband speed would make a disproportionate difference to the small business community.
A T-level skills boost to increase and improve the post-16 technical education available will also create the kind of transferrable skills entrepreneurs crave when they are building teams from scratch.
Today every business has a tech element – and technology is key to improving productivity. According to the Chancellor, a new tech firm is started every hour.
We’re also delighted about the announcement to create a more sophisticated measure of so-called ‘human capital’. We’ve been keen to point out that the mechanisms used by the Office for National Statistics (ONS) and the Government to evaluate the productivity and economic contribution of small business are outdated.
Hammond announced that the education secretary will release up to £80m to help small firms take on apprentices in the Spring Statement
It’s no longer relevant to rely on a head count to calculate value. Small firms often grow by outsourcing and provide important benefits to wider society and their local community.
This was the clearly the missing link this time last year when it felt like small firms we’re being decried for lacking ambition, being unproductive, merely starting firms in order to evade tax and running so-called ‘lifestyle businesses’.
If you were to ask us, small firms are often a lot more productive than larger ones. But scaling that can lead to productivity issues.
We love the idea of taking evidence from more productive firms in order to inform the less productive. It’s a radical step in the right direction and we’d be very keen to play a key role in this through our adviser platform.
So despite the fact that the statement was billed to be a simple recap of the Office for Budget Responsibilities report, it turned out to be a rather extensive shopping list for small businesses. Tick.
Small Business Essentials