Budget 2009 – what small businesses really want

This year’s Budget is increasingly being positioned as a matter of political life or death. But for many small businesses it’s more important than that.

Small business confidence

The O2 small business confidence survey of 3,000 SMEs released today highlights resilience and some cautious optimism with over a fifth of small firms expecting growth over the next six months (21%) and 66% determined to survive the recession.

A Forum of Private Business survey at the end of last week also showed some green shoots with 25% of their panel of SMEs saying they’d seen an improvement in the demand for their products and services over recent months.

Nevertheless that leaves a huge number of small firms feeling the pinch and living a precarious existence. Nearly half (49%) in the O2 survey said their confidence was at an all time low and the majority still cited cash flow as their biggest threat to survival, with 62% seeing scant improvement in bank lending behaviour.

An SME survival divide?

Both anecdotally and from surveys it looks like there’s a small business divide appearing. At the centre perhaps 50-60% of businesses are doing what it takes to survive and although this may be the worst recession for 60 years, they are quietly confident of getting through tough times.

But at the extremes, there are 20% who will flourish during recession and 20% who are in serious danger of sinking.

It’s very much a thrive, survive or nosedive outlook.

Budget leaks

Treasury purdah is dead and these days most of the Budget is heavily trailed. In a carefully and clearly briefed piece in the Financial Times last week, the government put a scheme to top up supply-chain insurance at the heart of its Budget response to SME concerns.

Andrew Jupp at accountancy firm Tenon suggested to me that this move was valuable as part of the overall efforts aimed at small and medium sized businesses.

But he also pointed out that just like the Enterprise Finance Guarantee (EFG) Scheme we’ll only be able to judge its real impact when we see how it’s implemented and how many businesses are, in practice, able to benefit from it.

The Telegraph has also hinted at business-related moves expected in the Budget.

These include tweaks to Export Credit Guarantees, a temporary increase to £50,000 in the annual investment allowance, but no immediate support for high tech companies struggling as VC funding has fallen by 70% in 2008 alone.

What SMEs really need from the Budget

All these elements are relatively minor and perhaps indicative of the huge debt government is increasingly saddled with.

But when it comes to the crunch most small businesses focus on cash and tax, if you ask them what they want from the Budget.

Budget 2009 - the small business twitterati speak!

A quick poll of Twitter found startups, SMEs and freelancers focusing on cuts in National Insurance, extending the VAT threshold, amending corporation tax rates to benefit small, rather than big businesses, more pressure on banks to lend and incentives for investors, like extending tax relief on the Enterprise Investment Scheme.

Meanwhile, The Federation of Small Businesses (FSB) has a whole raft of Budget proposals including resurrecting a post office bank and the introduction of a ‘corporate mediator’ to intervene in disputes between banks and their business customers.

It also points out that National Insurance and basic rate tax thresholds have fallen behind increases in the National Minimum Wage. This means benefits for the employed, benefits for the Treasury and SMEs being £8.28 a week worse off per employee.

So, in common with many businesses it’s calling for an increase in the NI and tax thresholds.

Others want to see the temporary VAT reduction extended to avoid more administrative headaches in the run-up to Christmas.

The FSB also proposes automatic business rate relief (less than 50% of small businesses eligible actually receive it at present) and reform of the AIM market for growing businesses.

AIM needs help

AIM and many of the growth businesses listed on it are suffering badly since the banking crisis hit home. It’s seen a 34% drop in the value of trading in 2008 compared to 2007 and IPOs are a sixth of what they were.

As a result both AIM itself and the FSB want to see Venture Capital Trusts allowed to participate in trading on the market to help increase support in public equity funding for smaller businesses.

Heads will roll

This year’s Budget is bound to be shrouded in nitty-gritty, indecipherable detail.

But SmallBizPod will be recording its regular Budget podcast so look out for it on Wednesday afternoon for some clarity on what it means for your small business.

Finally, as one surreal twitterer responded when I asked him what he wanted from the Budget: “Bring me the head of Alfredo Garcia”.

No doubt opposition parties will be calling for the head of one Alistair Darling. Whether the clamour will be added to by small business owners after Wednesday remains to be seen.

[Update: Take a look at our analysis of what The Budget means for small businesses and our annual Budget Podcast for more information and advice]

Alex is the founder and editor of SmallBizPod, the UK's first podcast dedicated to small business, start-ups and entrepreneurship. Alex writes about topical small business issues, entrepreneurs and anything else that catches his eye here on the small business blog. http://www.smallbizpod.co.uk