For Britain’s SMEs, the forecast looks increasingly turbulent: the uncertainty of new tariffs coming from across the Atlantic are expected to shave 1% off the UK’s already fragile growth projections. This, coupled with national debt levels not seen since the 1960s, the prospect of future tax rises and welfare cuts casts a long shadow over the business landscape.
Further immediate pressures on SMEs are going to bite in the new financial year: the recent hikes in National Insurance and the minimum wage, while intended to benefit workers, are undeniably squeezing already tight profit margins. The stark findings from the London Chamber of Commerce and Industry (LCCI) survey, reveal that half of London SMEs are considering halting pay rises and new hires just to stay afloat. These aren’t just numbers; these are real businesses, real jobs and real livelihoods at risk.
HMRC could do more to help: businesses that have relied on “time to pay” arrangements as effectively a low-cost line of credit, will be disappointed to see higher penalties for late payments and increased interest rates on money owing. This change alone will mean a re-evaluation of financial strategies and for many, it will mean seeking more competitive funding options elsewhere.
In the latest budget statement, “no immediate changes” on Research and Development (R&D) Tax Credits has been spun as good news, but the underlying anxiety surrounding increased HMRC scrutiny is still something that puts business owners off making a claim. But these credits play a vital role in fostering innovation and growth within SMEs, and for a government determined to promote a growth agenda, innovation from SMEs has to feature.
The government consistently talks about driving growth, but where is this growth supposed to come from? While pockets of potential exist, such as increased defence spending and planned construction boosts, outside this sector the picture is more mixed. And the overall growth forecast is still expected to halve, simply because these initiatives are unlikely to provide the broad and immediate relief that SMEs desperately need.
SMEs need action now
The October Budget feels like a lifetime away for businesses grappling with rising costs and the threat of tariffs. For many, waiting until then will simply be too late. Swoop, alongside countless SME owners and representative bodies, is calling on the government to take decisive action now to provide the support our vital small businesses need to not just survive, but to thrive.
We urge the government to implement the following measures without delay:
Increase the VAT threshold
This single measure would provide immediate relief to a significant number of smaller businesses, freeing up crucial cash flow and reducing administrative burdens. Raising the threshold would allow these businesses to reinvest in growth, innovation and job creation.
Closer trade ties with the EU
Brexit has increased, rather than reduced red tape. By looking again at the relationship we have with our nearest neighbours, particularly in the light of tariffs from the United States, we should tackle the complex regulations which burden so many SMEs. Streamlining these processes would free up time and resources that could be better used for core business activities.
More support for employment
The Government is cutting the welfare bill at the same time as making it more expensive to employ people. Addressing labour shortages is crucial for economic growth, but the cost of this should not fall solely on the shoulders of SMEs. The government should tackle the long-overdue issue of skills training and apprenticeship programs to create a pipeline of skilled workers and reduce the pressure on businesses to fund training themselves; support individuals facing barriers to employment through assistance with childcare, transportation and retraining, ensuring a wider pool of potential employees; and reform the apprenticeship levy to ensure it effectively supports SME participation.
The current climate demands bold and immediate action. Our SMEs are the backbone of our economy, driving innovation, creating jobs and contributing significantly to our communities. The government has a responsibility to create an environment where these businesses can not only survive the immediate challenges but also flourish in the long term.
Let’s not wait until October to address the urgent needs of our SMEs. For many, it will be too late.
