Small firms given a major boost by Budget growth plans
24 Mar 2010
Small and medium-sized companies will benefit from a range of new support initiatives to help them invest and grow, the Chancellor outlined in the Budget today.
They include changes to support small and medium-sized enterprise (SME) investment, new sources of finance for innovative SMEs and a new adjudication service to help SMEs get fair treatment from their banks.
The Budget also contains new targeted measures to support enterprise, innovation and access to finance across the economy, and lay the foundations for future long-term growth. Many of these will benefit the UK’s small and medium-sized enterprises (SMEs), which are vital to underpinning economic growth.
SMEs make up 99.9 per cent of the UK’s 4.8 million businesses and employ 13.7 million people – almost 60 per cent of the private sector workforce. They account for 50 per cent of annual private sector turnover.
A new body, UK Finance for Growth Limited, will oversee the development of the Government’s £4 billion-plus stock of finance schemes for SMEs.
This will help streamline and add coherence to the Government’s existing schemes and will also oversee the new Growth Capital Fund outlined today.
The Growth Capital Fund will provide finance for SMEs looking for between £2 million and £10 million in growth capital – addressing the market gap identified by the Rowlands’ Review of Growth Capital in November last year.
This will be a commercially run fund for SMEs with strong growth potential. Eventual fund size aims to reach £500 million following cornerstone commitments of £200 million from Lloyds, RBS, Clydesdale, Santander and Government.
To help SMEs who are experiencing difficulty gaining access to credit, the Government announced it would create a new Small Business Credit Adjudicator. The Adjudicator will work closely with an expanded Financial Intermediary Service in order to ensure that small businesses are treated fairly when applying for bank finance. The Adjudicator will have statutory powers to ensure that the judgements it makes are enforceable.
Business Secretary Lord Mandelson said:
“This is a budget for business, innovation and skills. It is a budget for jobs – both now and in the future. At its heart are SMEs, the real heroes of the recession and the backbone of the recovery.
“Helping British businesses access the finance they need to grow is crucial to protect and advance our economic recovery.
“That is why we are streamlining our financial assistance under the one body, UK Finance for Growth, and are ensuring that creditworthy smaller firms who believe they have been wrongly refused bank finance will have a strengthened avenue of appeal.
“We want to ensure that all businesses, but particularly smaller companies, receive the support they need from all sectors to ensure they reach their full potential.
“But we must ensure we continue to invest in the sectors in which the UK already excels. Today’s focussed investment in applied science and engineering research facilities will help our manufacturing sector continue its hi-tech, low-carbon transformation, so that Britain continues to hold its own globally.”
Other measures include:
- To help businesses make the most of opportunities that emerge during the recovery the Chancellor has announced that from October 2010 there will be a temporary one year increase in small business rate relief – approximately 345,000 will pay no business rates. In addition, the existing Entrepreneurs Relief on Capital Gains Tax will be enhanced by doubling the lifetime limit to £2 million; and the Annual Investment Allowance will be doubled to £100,000 benefiting around 80,000 business that are investing now (HMT).
- A new University Enterprise Capital Fund of up to £37.5 million, including up to £25 million investment from Government, to provide early stage funding for the commercialisation of promising university innovations.
- A further £20 million will be invested in the Small Business Research Initiative, to offer innovative small businesses opportunities to win contracts to develop and bring to market technology-based solutions to meet future public sector and societal needs.
- The Government will increase the amount of goods and services bought from SMEs, increasing Central Government procurement spend from SME supply chain by 15 per cent. It is estimated that this could mean new business to SMEs worth an extra £3 billion. Firms will be able to access most Government contracts through a single portal from December 2010, with relevant contracts flagged as SME friendly.
- To ensure the benefits of public sector prompt payment are spread more widely, central Government departments will pay 80 per cent of their undisputed invoices within five days of receipt and all main contractors to central Government will be required to pay their own suppliers within 30 days.
- Cutting the costs, and improving the control of the flow of regulation and making it easier for business to access help. Much has already been achieved in this area, with 3,000 business support programmes streamlined to fewer than 100 since 2006.
- The UK’s retail banks have made a commitment to support young people with sound business plans to help create the next generation of entrepreneurs.
- Expanding the ‘Flying Start’ programmes that encourage and support current higher education students and graduates to set up their own businesses and increasing the support available to young entrepreneurs via the Prince’s Trust’s new ‘Be Enterprising’ online toolkit.
These measures support growth - providing finance and advice for growth, supporting university spin outs and innovation, extending business opportunities through procurement and helping more young people to set up business. They also help reduce costs and ease cash flow for all businesses, through further commitments on prompt payment and regulation.
