Autumn Statement 2011: Entrepreneurs respond

Entrepreneurs cast their verdict on Osborne’s latest offering

There weren’t too many surprises in Osborne’s Autumn Statement. While the OBR’s revised growth forecasts prompted uproar in the Commons, most of the headline announcements had, unusually, already been leaked to the press. In fact, the few remaining surprises largely spelled good news for growing companies and investors. For those of you considering a move into angel investing, for example, the new Seed Enterprise Investment Scheme (SEIS) will give you 50% income tax relief on an investment up to £100,000 in a qualifying start-up.

There was even some good news on CGT – often the fall guy for chancellors looking to boost the Treasury’s coffers. Investors will receive a CGT exemption on gains realised in 2012-13 and then reinvested through SEIS in the same year.

However, while entrepreneurs were spared tax bombshells, some believe the measures announced don’t go far enough to have much impact on their businesses – or give the economy the kick-start it desperately needs.

As usual, the chancellor talked a good game, and stressed the need to support small and growing companies, but will this recently rebranded Autumn Statement actually boost your businesses’ growth? Here’s what some of the UK’s top entrepreneurs and business leaders had to say:

Overall impressions
Mark Pearson, founder of MyVoucherCodes.co.uk and Growing Business Top Gun 2011:

“Cameron wanted the next Facebook to come from the UK, and this goes a great way towards helping that happen. But does it go far enough? I’m not so sure.

“As with every one of these kinds of announcements, the devil is always in the detail. We’ll need to really look at the small print to see how far these will go in actually helping boost the UK SME community. As someone who has managed to build a successful business within the UK during a recession, I know how hard it can be, not just in a financial sense. Perhaps what the UK really needs is more money to be injected into business mentoring schemes, as this would certainly have helped me get to grips with the difficult challenges that every new business faces.”

Anil Stocker, co-founder and director of MarketInvoice:

“With a predicted fall in growth for next year, there do not seem to be any tangible demands on the banks to lend to small and medium-sized businesses. When this scheme expires in two years’ time, you have to wonder if we will be faced with the same problems that we are facing now.

“Government underwriting of small business loans is not sustainable in the long-run and viable private sector alternatives should be encouraged. Over time, these new solutions will be the only way to solve the lack of credit available to small and medium-sized businesses, and the government should be careful not to crowd out current innovation going on in the [small business] funding market.”

Will King, founder of King of Shaves:

“Being a sailing chap I’ll use the analogy that the UK is a sailing ship in the middle of a European debt storm. To avoid being sunk by it, should it a) batten down the hatches and ride it out, b) hoist a spinnaker, fill it with more debt and attempt to outrun it or C) maintain full sail, increase the crew on watch & keep going?

“In my opinion, George Osborne has chosen option c) and this is what I would do. Reasons being:

The UK must reduce structural deficit and not increase its borrowings by hoisting a spinnaker. It may well capsize, and be punished by external factors, markets deeming it riskier, increasing interest rates and costing it dear – and all who are in it. Osborne is sticking to his strategy and not tacking into the storm. This is correct, in my opinion.

“By maintaining its credit rating (seaworthiness) it can secure £40bn at good rates to improve finance-ability for small businesses at lower interest rates. Good. £40bn is a punchy number and as long as our (majority state owned banks) do what they should, this is good.”

Cliff Prior, CEO of UnLtd:

“The revised forecasts for the economy are grim, and make it ever more important that social entrepreneurs can step forward to help the economic and social recovery of the UK. It is good to see the long awaited VAT exemption for back office services shared between VAT exempt bodies, including charities.

“But for start-up social entrepreneurs, the real questions are whether the new tax break for seed enterprise investment, and the credit easing scheme for small businesses, will work for social enterprise. We’ll need to look at the detail but with 30% of start-ups now social start-ups, it’s critical that these measures work for what is now Britain’s fastest growth sector.”

On the National Loan Guarantee Scheme – a major programme of credit easing capped at £40bn, with £20bn available in the next two years:
Stephen Archer, co-founder of Spring Partnerships:

“Very good; I want to see the detail on who and how entitlement works but this is positive.”

Jos White, co-founder, Notion Capital:

“The move by the government to underwrite up to £40bn worth of loans to small businesses has to be seen as a positive. George Osborne is demonstrating that risk is not a dirty word and that it is essential to support small and medium-sized businesses as they are the main driver of economic growth. Every small business I’m involved with is growing and looking to hire more people. Building a business is a daring journey and it does usually require additional capital – it’s good to see that this government understands this and that they are prepared to put their money where their mouth is.”

Anil Stocker, co-founder and director of MarketInvoice:

“The National Loan Guarantee Scheme that has been unveiled today should be commended for its aspiration to reduce the cost of finance for small and medium-sized companies. It is however the latest in a long line of government interventions in a banking sector that seems to struggle to extend finance to small and medium-sized businesses.

“This scheme shows the government is still relying on banks to originate and distribute [small business] loans, something they have struggled to do effectively under either Project Merlin or the Enterprise Finance Guarantee Scheme. Today’s announcement essentially gives the banks another chance to prove that they have the infrastructure, expertise, and motivation to lend to small and medium-sized businesses. If you talk to small business owners about their experience with the Enterprise Finance Guarantee, many applications were still turned down and it was very difficult and laborious to obtain the loans. It will therefore be interesting to see what kind of hoops the banks will force [small businesses] to jump through to obtain the loans that have been outlined today.”

Dr Francis Greene, associate professor at Warwick Business School:

“I would be very surprised if it makes that much difference to small business mainly because there is not a lot of appetite for loans at this moment in time. A simple reduction of one per cent on interest rates – if that transpires – is likely to make a marginal difference in the investment strategies of small business. The bigger issue for small firms is the state of the economy, as shown by survey after survey. “In the UK we have around 4.5 million businesses, but only about 37,000 have more than 50 employees – that’s less than 1 per cent. I don’t think that this scheme will reach the vast majority of small businesses. When it comes to the guy on the street who is self-employed or the micro-business I would doubt very much if they would go down this particular route of credit easing.”

Gary Stewart, director and founder of IT professional services company Xceed, said:

“Underwriting £40bn worth of loans is all well and good but a process needs to be in place to ensure that SMEs can get credit quickly, without running a bureaucratic gauntlet to secure the funds that can support growth.”

Tracy Ewen, managing director of IGF:

“The National Loan Guarantee Scheme looks like good news on paper – but the cynics among us might think that if Project Merlin hasn’t worked – and this scheme looks like an admission that it hasn’t – then why will this be any better?”

On the extension of the business rate relief holiday to April 2013 – six months longer than previously announced:
Stephen Archer, co-founder of Spring Partnerships:

“A good gesture that will benefit a lot of SMEs.”

Kevin Flood, co-founder and CEO of Shopow:

“For the British economy to start growing it is absolutely vital confidence returns. With conditions still fragile on Britain’s high street, providing greater support for small and medium-sized businesses and freezing the proposed fuel duty rise are welcome. The Chancellor’s proposed extension to rate relief for small firms and the implementation of a credit easing program to underwrite up to £40bn of small business loans will give smaller firms, greater confidence. It will not however alleviate the strain on the purse strings of the consumer.

“The government needs to review its decision on VAT however to alleviate some of the economic gloom people are experiencing. A temporary cut in VAT would help give consumers confidence to get out and spend.”

On the launch of a new Seed Enterprise Investment Scheme, so that from April 2012 anyone investing up to £100,000 in a qualifying start-up will receive income tax relief of 50%:
Stephen Archer, co-founder of Spring Partnerships:

“Excellent, could have gone further (NI, secondary investment relief, profit tax relief for 4 years but for entrepreneurs this will be attractive and a stimulus.”

Luke Lang, co-founder of Crowdcube:

“We are delighted by the chancellors plans to expand the already successful Enterprise Investment Scheme to further stimulate seed capital for UK start-ups. The new 50% tax relief will have a significant impact on investment and give British entrepreneurs a genuine boost. We urge George Osborne to minimise red tape so that the benefits of the new scheme can kick-start the small business economy as soon as possible.”

On plans to invest in the UK’s infrastructure
Dr Francis Greene, associate professor at Warwick Business School:

“The increase in the Regional Growth Fund and the infrastructure investment announcements are a sticking plaster over a gaping wound in terms of addressing regional disadvantage for the Midlands, for the North and for the South West. In overall government spending terms it’s a tiny percentage.”   “Any infrastructure spending is to be welcomed and a positive step. But that is a cautious welcome as governments have a habit of suggesting these things are going to happen imminently whereas they may not actually happen for some time.” 

Tracy Ewen, managing director of IGF:

“Small business owners want real boosts – meaningful cuts to NI, VAT or corporation tax are what’s going to make a difference to the economy, not Government-led infrastructure investment. [Small businesses] need less red tape and real tax cuts – not more ‘Big State’ initiatives.” 

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