The latest budget may have been aimed at individuals and families struggling with the cost of living crisis, but business owners also got a treat. To bring back the start-up boom we saw during the pandemic and back British business to help grow the economy, a £4.3 billion ‘package’ was announced. This included, among other things, business tax changes, R&D relief, late payment reforms, business rate freezes, and national insurance reforms for self-employed people.
There was a lot to unpick, but despite the headlines focussing on the savings that individuals can make, I truly believe more could have been done to help struggling SMEs and sole traders.
The most recent ONS figures paint a worrying picture of the state of the UK start-ups landscape; Q3 this year was the first period since Q2 2021 where business births have outweighed business deaths. And although this is encouraging, the truth is, without substantial investment in UK businesses, we could see that flip back very quickly.
The measures put in place sound great in theory, but the reality isn’t always the same. For instance, the Class 2 National Insurance saving only saves the average self-employed person £16 per month, while the Class 4 National Insurance has been cut by a percentage point, saving the average business owner or sole trader £29 per month.
Of course, every little helps at times when business isn’t thriving, but an extra £45 per month just isn’t going to help a business stay afloat during these tough times; it’s not going to cover wages, it won’t pay for new equipment, and it certainly won’t keep the lights on.
It’s also worth noting that these only come into effect from April, so self-employed people will have to wait five months before they feel any benefit – something many simply cannot afford to do. As such, I fear we’ll see many more small businesses fold before these measures come into place – which could spell disaster for the employment sector as we head into the new year.
At the last count, there were 5.5 million SMEs in the UK – making up 99.9% of all UK private sector businesses. Astonishingly, these turnover approximately 2.4 trillion, with the majority small (0-49 employees), and around 36,000 classed as medium (50-249 employees). These 5.5 million SMEs employ half of the UK’s workforce in total and more than 60% of the total number of people employed by private sector companies. If these businesses started to falter and crumble under the pressures of the rising costs from within and externally, this means that millions could find themselves out of work.
We already know that the unemployment rate has started to climb over the last couple of months, with figures from September showing a 0.5% increase on the previous quarter, and crucially, 0.3% higher than pre-pandemic. The same data also shows that the total hours worked have decreased on the previous quarter – something that is important to keep an eye on if we’re looking at sole traders and SMEs where owner and employee flexibility is more common.
Despite believing much more could have been done to help businesses ease the squeeze, there is one point that I believe is a long overdue reform – a crackdown on late payments.
Research from this summer shows that UK small businesses are owed £32bn in late payments, which is an astonishing figure. As a direct-to-consumer company, we’re lucky not to have suffered too much from late payments, but we do know the pain it causes. So it’s great to hear that these changes mean that ‘any company bidding for large government contracts must demonstrate that they pay their own invoices within an average of 55 days’. This will eventually shorten to 30 days and will help SMEs accurately plan their cash flow.
It’s also great to see that the government is continuing to encourage investment in the UK with the permanent tax break, often known as ‘full capital expensing’. This means that for every £1 spent in the UK on IT, machinery and equipment, the business can claim back 25p in corporation tax by deducting it from their profits. It’s a great way of encouraging British business to invest in British business – something we’d all love to do, but sometimes costs just become the number one priority. However, this will go a long way when it comes to helping to offset any savings made by purchasing equipment and services abroad.
All in all, the autumn statement was a tale of two halves for me – I appreciate that there is only so much in the pot, but history has shown that investing in and nurturing UK-based businesses will only pay dividends, with lower unemployment figures, more innovation, and in turn, a more buoyant economy. And as a small business owner, it does feel like we are still being somewhat penalised for being self-employed, rather than celebrated for being part of one of the biggest contributors to the UK economy. If the UK is to continue on its path to drive forward building British businesses, both entrepreneurs and budding entrepreneurs must feel like the rewards outweigh the risk. And I’m unsure if it feels like that at the moment.
Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.