Budget 2009 – small business reaction and impact

Alistair Darling sets out precious little by way of support for small businesses in his 2009 Budget. But what do SMEs really think?

By News Desk
22nd April 2009 at 16:30

Budget 2009 - small businesses receive little from Alistair DarlingAs expected today’s Budget presented by Alistair Darling certainly painted a bleak picture with stratospheric government borrowing at £175 billion this year and £173 billion next and the economy shrinking by 3.5% in 2009.

With such little money in the pot, there was scant support for the UK’s small and medium-sized enterprises.

The headline features for SMEs included:

an extension to 2010 of the period in which loss making businesses can claim tax on profits made in the last three years;

capital allowance rates doubled to 40%;

the launch of a £750 million investment fund to provide support to emerging technologies in green, digital and energy areas, and;

the introduction of a top-up supply chain insurance to help companies protect themselves against non-payment.

But there were also some stings in the tail for already hard pressed small businesses:

the 2p rise on fuel duty will have a significant impact on many businesses;

the increase in statutory redundancy pay from £350 to £380 may also be a double-edged sword;

no change to corporation tax rates with the rise from 20-21% remaining in place;

increasing the top-rate of tax to 50% may also be seen as a measure which is a disincentive for some of our most successful, high-flying entrepreneurs.

The Federation of Small Businesses (FSB) chairman, John Wright, said:

In what has been the most crucial budget in decades, the FSB is disappointed that small businesses have been largely ignored.

Meanwhile, the chief executive of the Forum of Private Business said:

The Chancellor has missed a vital opportunity to produce a Budget for business survival and economic growth. We called for a real and sustained support strategy, acting as a catalyst for broader economic recovery, but instead we got a Budget that appears to be focused on the next general election.

Mark Prisk, Conservative shadow minister for business and enterprise, commented in SmallBizPod’s Budget podcast:

I think this is deeply disappointing for small businesses, the Budget has really ignored their needs.

Meanwhile Lorely Burt, Lib Dem shadow on business and enterprise, who also gives a full reaction in our podcast later, said:

A bit like the curate’s egg it was good in parts, but there were a lot of things I was hoping to see that weren’t there.

She went on to say the Lib Dems wanted a bit more Robin Hood action – closing tax loop-holes for rich individuals and businesses in order to benefit ordinary businesses.

All in all, more worrying perhaps than the lack of benefits for small business in the Budget is the general economic outlook.

3.5% growth in 2011 seems enormously optimistic and as Rhodri Ferrier founder of men’s grooming start-up Bulldog said to me earlier:

I think the Chancellor’s growth forecasts for 2011 are a fantasy. We’re in an economy on a knife edge and it’s a very tough time to be a start-up.

For practical details on The Budget check out our very own accountant James Smith’s advice:

http://www.jamesesmith.co.uk/budget2009.htm

and also the Business Link website.

www.businesslink.gov.uk/budget

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  1. […] Take a look at our analysis of what The Budget means for small businesses and our annual Budget Podcast for more information and […]

  2. Shaa Wasmund says:

    It’s no surprise that the business community has come out in force to condemn the Budget; business was barely referred to in Alistair Darling’s speech, let alone supported.

    While I welcome the introduction of a £750m investment fund offering financial support for innovative technology and science firms, as well as the doubling of capital allowance for investment, the Budget could have gone so much further. There was virtually no help for most small and medium businesses, widely hailed as the lifeblood of the economy. If anything, Darling’s taken a series of swipes at the some of the most vulnerable small businesses, such as those in the pub trade with a 2% hike in alcohol duty. All this pales in comparison compared to what is really needed by small business: freeing up of consumer spending and forcing banks to lend. I, along with many other small business owners and entrepreneurs, would urge Darling to get his priorities straight.

    Shaa Wasmund

    Founder of smarta.com

  3. Thanks Shaa, I’m not sure lending and spending are the best way out of this lending and spending provoked crisis.

    There’s money ring-fenced for business rate relief, yet still the government won’t allow automatic relief for English SMEs like they do in Wales. That’s a ‘no additional cost’ measure suited to a government which has run out of money. It seems idiotic not to have implemented it.

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