Chancellor backs SMEs in 2021 Budget

There was always going to be plenty of excitement ahead of the Chancellor's announcement of the Budget, more so than ever this year as the country emerges from the pandemic.

Chancellor backs SMEs in 2021 Budget

There was always going to be plenty of excitement ahead of the Chancellor’s announcement of the Budget, more so than ever this year as the country emerges from the pandemic. On the whole, we knew what to expect, but now I’ve had a chance to digest the details, in this month’s article I thought I’d discuss some of the policies of particular significance to SMEs. 

They broadly fall into two categories: those that provide support as we slowly get back to business as usual and those with a longer time horizon.  

Starting with the near-term policies, the Chancellor announced two grants for small businesses. The first one boosts the recovery from the pandemic, primarily targeting the retail and hospitality sectors. English SMEs that have been affected by lockdown may be eligible for up to £18,000 to help them reopen. Local authorities are responsible for distributing these grants, like the business rates relief. There’s a separate allocation of funds for the devolved nations.   

The other is known as the ‘Help to Grow’ fund, and it aims to enhance productivity, a challenge for SMEs that predates the pandemic. It provides training for managers to develop their strategic planning, with an emphasis on digital adoption, and offers discounts of up to 50% on software in the form of vouchers.  

The Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) weren’t extended past their current deadline of 31st March. They’ll be replaced by the government-backed Recovery Loan Scheme which launches on 6th April and runs until the end of the year. Companies can borrow from as little as £1,000 up to £10 million, but the terms aren’t as favourable as CBILS or BBLS as the situation isn’t as urgent. Interest rates will be higher and there will be no repayment holidays, and each lender will carry out its own credit and fraud checks. It’s worth noting you can still take advantage of the Recovery Loan Scheme even if you received funds through CBILS or BBLS. 

Beyond the pandemic

The Chancellor also announced several policies to make SMEs more competitive in the long run.  

The super deduction is the most attractive tax relief on business investment ever offered by a British government. It allows companies to claim back 25p from every pound they invest, for example in machinery or equipment, for the next two years. That’s the equivalent of 130% of the total cost, the highest incentive among the 36 members of the Organisation for Economic Co-operation and Development (OECD). 

Additionally, the government has committed £375 million to the Future Fund: Breakthrough. These funds will be co-invested with private investors, such as venture capital trusts. They’ll target high growth, innovative firms that spend a lot on research and development, like the life sciences and clean technology sectors. The minimum investment is £20 million, so this programme is more suitable for mature companies (other programmes are available for earlier stage startups).  

Whatever you think about the overall impact of this year’s budget on the UK economy, it was relatively SME friendly. The Chancellor seems to have learned important lessons from the 2008 financial crisis, where many of the companies that survived have since thrived. Hopefully, the policies he put into place on 3rd March will have the same effect this time around.

ABOUT THE AUTHOR
Andrea Reynolds
Andrea Reynolds
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