Amid the backdrop of economic uncertainty, the end of the super-deduction scheme this month has led many to reflect on one of Rishi Sunak’s flagship policies, and the impact that it has had on SMEs. While the scheme has provided some much-needed tax relief to business owners, their verdict is clear – it did not go far enough.
With fewer than half (48%) of SMEs taking advantage of the scheme and more than 1 in 2 stating that the government isn’t doing enough to support investment, there is concern that the current approach does not encourage SMEs to fund their ambitions or strive for growth. Accounting for 99.9% of the business population, SMEs are the backbone of the UK’s economy, yet chronic underinvestment in the private sector has led to stagnation and frustration. There is a world of opportunity to be gained from kickstarting business investment, productivity and growth, with the entire economy likely to reap the benefits.
Although the merits of the scheme are clear, the government’s communication of the scheme was not: 1 in 4 (23%) SMEs weren’t aware a business of their size could use the super-deduction, and 1 in 6 (17%) don’t know how to claim the tax relief. This lack of transparency presented a crucial barrier to SMEs accessing the scheme. Despite a lack of faith in the government’s support, the sentiment amongst SMEs is one of cautious optimism – business owners are seeing operations continue to tick along and have ambitions to drive growth. It is clear, however, that external factors are having a significant impact on their outlook and overall confidence.
Even with a general sense that the government could be doing more to incentivise investment, there is potential for 2023 to be a better year in terms of growth, with many still looking to invest. While just 59% made a significant business investment last year, 92% expect some investment this year, with an average of £314,000 planned over the course of 2023. It is crucial for the underlying infrastructure to be in place to enable them to do so: the current lending landscape certainly isn’t optimised for SMEs.
Ultimately, this presents a barrier to investment at a time where it is greatly needed. As traditional lending routes become more difficult to navigate, alternative options will have to come to the fore and give SMEs access to the right finance at the right time, to empower them to meet their ambitions. With SMEs spending almost three weeks a year on investigating and applying for finance options, specific guidance from impartial experts will play a crucial role in providing SMEs with the resources and confidence needed to invest and fund their ambitions.
