“We won’t survive” say UK businesses – how can the Autumn budget help?
Tomorrow will see Jeremy Hunt, the chancellor, declare his debut Autumn budget statement in an attempt to restore stability in the midst of a recession and in the aftermath of Liz Truss’ mini-budget.
The task for Hunt will be to present a set of policies that can go through parliament. However, UK businesses are already crying out for help with 1 in 4 SMEs stating that the UK economy will never recover from Brexit and the pandemic, according to new research from FreeAgent, the cloud accounting software company.
We attended the FreeAgent roundtable to hear about predictions and desired outcomes, from business leaders and changemakers, from tomorrow’s budget.
Starting the conversation, FreeAgent CEO, Roan Lavery, explains the current landscape for UK businesses and how tomorrow’s budget needs to support the most vulnerable businesses. He says: “We have been living in an unprecedented period of insecurity. Small businesses make up the backbone of the British economy and are the most vulnerable to periods of insecurity. Jeremy Hunt doesn’t have an easy job – he has the difficult task to plug the hole in finances, while leading a path to growth, and also helping average people get through the recession.
“How will we support people starting their own business? Another issue will be how businesses can get access to funding and finance. There is a chronic issue of late payments, especially when they’re dealing with larger companies as customers.
“In the Autumn budget, there is likely to be an increase to corporation tax and freezing rates and the VAT threshold. Hunt needs to target those who are protected the most while protecting the vulnerable. He needs to ask: how can we make sure those in society are able to shoulder this? When it comes to something like windfall tax, people support this and it needs to be taken up more broadly.”
The issue of retaining talent and retention is another issue being faced by UK businesses. A growing skills gap may be exacerbated by economic pressures.
Yogesh Dhanak, Snr Technical Advisory Manager at ACCA, a global accounting body, explains how businesses can retain talent through through rethinking through focusing on wellbeing. He said: “As a global accountancy, we have insight from a wide range of sources. We are seeing trends where more people want flexibility. A lot of people are going self-employed. There is a great resignation, especially in finance there is a lack of talent. So employers need to look at how they can be more flexible with staff.
“The past few years (because of the pandemic) has had a detrimental impact on people’s mental health. A lot of businesses do support people working from home but that creates a disconnect between staff and employers. Checking in with mental health does help with retention, but that needs to be balanced with asking what that cost is for employers. What was positive from Kwarteng’s statement was the cut of national insurance increases – I hope this stays in tomorrow’s statement.”
No matter the outcome of tomorrow’s statement, there was a consensus feeling that businesses should recognise the support that they can access.
Emma Jones, Founder of Enterprise Nation, a community of small businesses and advisors. highlighted the importance of businesses seeking this support. She says: “I think we need to be realistic that the chancellor has a hard job but I would love to talk about the topic of support – small businesses are reaching out. This year we will help 700,000 businesses, this is 97% up from last year.
“There are three buckets that businesses should be thinking about. They should be thinking about peer support — this can often work when you put a business owner with another business owner, trusted advisors — this can mean business owners seeking advice from expert professionals, and mentors – business leaders need someone to listen to them.
“People often say what should the government do more of? I often think what should the government do less of? Chopping and changing of plans really confuses small businesses. If the labour party gets in, please consider continuity. It’s great that Facebook, Amazon and Uber run support for small businesses – these corporates see that if small businesses do well, they do well. So we should welcome private support provision.
“Keir Starmer said “tax Amazon not the poor”, but tons of small businesses rely on amazon for their income. So even if something looks politically popular, it can be damaging. Tomorrow, I would love to see the government championing entrepreneurship and see Jeremy Hunt stand up and reference this and get entrepreneurs on side. Overall, I am positive about what the chancellor will say tomorrow.”
FreeAgent’s research highlights the impact that continued economic strain has in crippling businesses. The research highlights how many businesses are struggling to survive in the current economic climate, with the majority saying they are concerned they won’t make it beyond the next year or so. While tax cuts could lead to a healthier jobs market for accountants and geographical expansion for SMEs, more than a third (37%) of accountants and 22% of SMEs say they would use any future tax cuts announced by the government just to stay afloat.
Almost 2 in 5 (37%) survey respondents say they are not confident that the government will step in to support businesses facing an economic environment about to enter a long recession. In fact, 64% of business owners are worried they can only survive the next 12 months, while just 16% of business owners think they’ll remain open indefinitely. Almost 1 in 3 (30%) accountants think their practice will only survive for the next year, with 10% only hoping to remain solvent for six months.
Paul Surtees, CEO & Co-Founder of Capitalise, an online accounting system, shines a light on the economic state and the how this is impacting SME lending and funding. He said: “We aren’t getting cheap energy from Russia anymore. Inflation at 11.1% — 41 year high. PPI – the price at which our manufacturers are buying – is up. The Bank of England has said we have five quarters of recession, we are expecting rate to get to 5.25% — this impacts the rate businesses can borrow.
“We know there is funding out there, but the rates are going to be higher. Lenders will lend through a cycle. These are rates we will have to live with for a while, we have to understand that this is the new world SMEs are operating in. In the last 24 hours, three lenders have exited the market. SMEs need accountants and lenders more than ever – and it is there but it’s coming at a difficult rate.”
Yet, Julia Kermode, Founder of IWORK, a platform for independent workers, feels that the economic conditions goes beyond impacting business owners but affects freelancers and sole traders. She said: “We are about to enter one of the most challenging economic environments in recent times and small businesses, sole traders and freelancers are more exposed than ever. Protecting these workers is vital to safeguarding the wider UK economy and it’s critical that action is taken before additional macro economics pressures drive these groups further into the red. Small businesses and independent workers hold the key to the economic recovery – failure to support these dynamic, entrepreneurial individuals will only deepen the crisis.”
Darren Westlake, CEO & Co-founder, Crowdcube, said: “Many of our country’s most successful and respected ventures would not exist were it not for the conditions that successive administrations have put in place to encourage risk and entrepreneurialism. Even if, in order to reassure the markets, the lion’s share of the Chancellor’s announcements will need to be contractionary, these conditions must be maintained.
“We recently asked over 50 founders what their priorities were for this week’s Statement, and many were sanguine about the tax rises that have been heavily trailed in the media. Productivity-enhancing investment in skills and infrastructure, while subsidising green corporate investment, were – in their eyes – far more important than keeping corporation and income tax low.
“Once we have weathered the current macroeconomic storm, start-ups and growth stage companies will be the bedrock on which our recovery is built. While prudence is the order of the day, an overly hawkish Autumn statement risks extinguishing our ability to take advantage of my sector’s potential before the opportunity has even presented itself. It is for this reason that the demands of my sector must be listened to and acted upon.”