Did small businesses get the budget they wanted?

We examine yesterday’s Spring Statement in detail to ask: did the Tories do enough to win back the business vote?

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Written and reviewed by:
Helena Young

Billed by the Treasury as the “year of the SME”, many viewed yesterday’s Spring Budget as a Hail Mary for the Tories to try and win back the substantial proportion of entrepreneurs with whom it has lost favour.

Earlier this year, a Startups survey revealed that business incentives will affect how 54% UK business owners vote this election year. When we asked this group what policies they would include in their budget wish list:

  • 21% wanted a reduction in corporation tax
  • 18% wanted funding grants for environmental practices
  • 16% wanted skills training subsidies
  • 13% wanted an extension of the Energy Bills Discount Scheme 
  • 8% wanted investment in innovation hubs
  • 8% wanted broadened Small Business Rates Relief (SBRR) 
  • 6% wanted more support with childcare
  • 6% wanted help with R&D tax credits
  • 4% wanted to see more levelling up investment

Below, we breakdown the wins, losses, and curveballs in the 2024 Spring Budget to ask if and how the Conservatives plan to address these policies – and whether it can sway real-life business owners.

1. Reduction of corporation tax

Business owners have been calling for a reduction in the Corporation Tax (CT) rate ever since it was raised in a shock move last April from 19% to 25% for those with profits over £250,000.

Smaller entities with profits of up to £50,000 are currently taxed at a reduced rate of 19%, while all other businesses receive marginal relief of 26.5%.

Yesterday, Chancellor Jeremy Hunt delivered nothing revolutionary. The offer was no more than a drab extension to full expensing for leased assets – a form of capital allowance that helps early-stage startups invest in plant and machinery.

“I’d really like to have seen a reduction in corporation tax,” says Tom Bower, founder at Hypothesis Media. “My income is effectively taxed twice, both when it hits the business account and then when I draw down dividends.”

2. Funding grants for environmental practices

Almost one in five SME owners named funding for environmental practices as their number one policy this election year, making it the second most sought-after policy overall. Their hopes will have faded fast.

Hunt announced an extension to the freeze on petrol and diesel fuel duty. But, he offered no further aid to support key low-carbon technologies such as electric vehicles (EVs).

Large companies were also promised £200m in R&D tax cuts to develop energy-efficient and zero-carbon technology. But, SMEs were left out of the conversation.

Given the Tories’ track record on green pledges, its refusal to budge is no surprise, but will certainly disappoint a significant chunk of small business voters.

3. Skills training subsidies

Labour shortages have defined the last few years for small businesses. As hiring slows and visa eligibility changes deter companies from sponsoring foreign talent, it’s no surprise that 16% of SMEs told Startups they wanted greater assistance with skills and training programs.

Digital upskilling schemes have already previously been announced and the Spring Budget doubled down in this area, with a £7.4 million AI upskilling fund pilot announced to help SMEs specifically develop AI skills.

Eloïse McKenna runs Studio Dandelion florists in Leyton, east London. She says the Chancellor cherry-picked the tech industry to bestow policy favours on – with employee support being a prime example.

“The government always seems to be attracted to supporting industries in the tech sector,” says McKenna, “The bigger, shinier industries are recognised – but there are so many small businesses like mine that are overlooked.”

4. Extension of the Energy Bills Discount Scheme

There was no mention of the Energy Bills Discount Scheme in yesterday’s budget, meaning it will likely come to an end as planned on March 31st.

Reaction to the scheme – which was first introduced in 2022 – has been mixed. Some experts are criticising it as lip service, despite the devastating impact of cripplingly high gas and electricity bills on SME cash flow.

“The Energy Bill Discount scheme was pretty much redundant and was ineffective in supporting the vast majority of small businesses anyway,” says Chris Shaw, Chair of the Energy Consultants Association (ECA) and CEO at UtilityBidder.

However, with no other lifeline to hold onto, many small business owners were hoping it would be replaced with a more generous package of support in the budget. No such luck.

5. Investment in innovation hubs and levelling up

The 4% of business owners who requested more levelling-up funding from the government got their wish yesterday – but only on paper.

The Chancellor made a song and dance about a range of ‘levelling-up’ investments that will fund high tech clusters across the country; a win for regional business owners except the money will be allocated to only one location based outside of the South East.

SaxaVord Spaceport in Scotland will be given £10m in funding, while a health tech cluster in Canary Wharf was given a £118m loan. An undisclosed figure for a future development corporation in Cambridge was also promised.

Towns and cities in the North, Midlands, and South West will see none of the funding, suggesting the Tories have decided to redefine the term ‘levelling-up’ to refer to areas within a 60 mile radius of Westminster.

6. Broadened Small Business Rates Relief (SBRR)

Despite months of lobbying from retail and hospitality groups, the government remained mum on the issue of small business rates.

As a result, companies in England will endure a tax hike from April 1 when the business rate multiplier rises. With no help on the horizon, and no extension to Small Business Rates Relief (SBRR), the message to struggling UK pubs and shops is clear: ‘not our problem’.

Alison Boutoille is founder at CityStack, an initiative to support independent pubs. “The massive increase in operating costs since 2019 has strongly contributed to the disappearance of many treasured pubs, and it sadly sees no sign of abating,” Boutoille says.

8. Childcare support

One area where the budget looks likely to deliver is childcare. The government confirmed plans to guarantee working parents of two-year-olds in England access to 15 hours of free childcare will still go ahead from April 1, giving working parents room to breathe for now.

Eligibility for child benefit will also be extended to households with a combined income of £60,000, rather than £50,000.

Vicky Walker is Group Director of People at Westfield Health. “This policy update is a vital step, but employers must also be willing to make reasonable adjustments for working parents to support and improve their well-being,” Walker warns.

“Businesses that offer flexible working where possible and trusting employees can significantly help to keep parents in their careers.”

8. R&D tax credits

Industries seeking an extension to R&D tax credits were given something to toast ahead of yesterday’s budget – although celebrations will likely be muted outside the manufacturing sector.

On Monday, the government announced a £360m funding package to support existing R&D and manufacturing projects for sectors like aerospace and electric vehicle (EV) production.

Hunt did announce that the government will establish an expert advisory panel to help in advising HMRC on R&D claims in an effort to untangle red tape for small business claimants.

Nigel Holmes, Director of Research and Development at tax specialist firm Ryan, says: “A fresh look at the process of claiming reliefs is needed. There is a lot of discussion around legitimate claims being declined.”

Has yesterday’s Spring Budget built or burned bridges with UK business owners?

This year’s Spring Budget was never going to set the world on fire – particularly given the number of fiscal fires the government is already trying to put out.

Still, that only three of the nine policies that small business owners requested have been addressed is a cause for concern for the government.

Hunt’s was supposed to be a last gasp effort to win back the hearts of the UK’s business owners – 58% of whom already feel the need for a change in government this year. From the above record, few will be convinced to change their minds.

Jenny Blyth owns Storm in a Teacup Gifts, a small retail store. Blyth summed up her thoughts on the budget succinctly.

“Jeremy Hunt’s Budget was filled with hot air and not a great deal of substance,” she tells Startups. “I was surprised to hear, however, that small business is close to the Chancellor’s heart, which was a novelty if nothing else.”

Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

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