The Government’s move to make full expensing available for leased equipment is another measure to boost productivity and growth, but what does this year’s Spring Budget mean for businesses? Ed Rimmer, Chief Executive of Time Finance, shares his thoughts on optimism and the outlook for the economy and UK SMEs.
In his Autumn Statement last year, the Chancellor announced the move to make full expensing permanent, a measure that was considered to be the biggest business tax cut in modern British history and one that would stimulate £20bn of investment a year for ten years.
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This was a great move, but it fell short of helping the many businesses that simply don’t have the working capital to invest in growth. The Chancellor put this right in his Spring Budget with the announcement that full expensing will now apply to leased assets. It wasn’t the headline grabber for this pre-election budget, but it will make a big difference to businesses.
The reality for many businesses is that the challenges of the past few years have left their capital in short supply. Cashflow is still a very real day-to-day issue for businesses, and when it comes to investing in new equipment – tax incentives or not – many businesses may have been putting their plans on hold.
Now they can lease new equipment and offset the costs against their tax bill, reducing their tax by up to 25% for every £1 invested. Making investments more affordable will be a big catalyst for businesses, allowing more SMEs to invest in growth while benefiting from the Annual Investment Allowance.
A boost to business confidence
Elsewhere in the Spring Budget good news came in the form of forecasts from the Office for Budget Responsibility (OBR) that inflation is continuing to head in the right direction, and the OBR’s prediction that inflation will fall lower than the 2% target in just a few months will be a big boost across the board.
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By GlobalDataThis is really important, and something we need to keep fueling. The Chancellor called this a ‘budget for long-term growth’, and optimism and confidence are vital here. Business investment, productivity and growth are only possible when businesses feel empowered to chase their ambitions. A business that is cautious becomes risk averse, and before too long it has the potential to stagnate or worse, make the difficult decision to fold.
There is no question of how challenging the past few years have been for businesses, and for many the need to respond to change won’t disappear overnight. New challenges have reared their heads too frequently since 2020, but the resilience amongst SMEs has created a bold, brave and agile business community.
At the end of last year, there was a rise in new businesses with the number of UK incorporations between October and December 2023 increasing by 30,363 (16.5%) compared to the same period in 2022. Confidence is growing, entrepreneurs are seizing opportunities, and that’s something we need to collectively nurture for the sake of our economic strength.
Measures to support business growth
For a long time businesses have been in survival mode, managing their everyday expenses against a backdrop of ongoing economic challenges. In this year’s Spring Budget the Chancellor announced a transition from the Recovery Loan Scheme to a Growth Guarantee Scheme, which will help an estimated 11,000 businesses. This move – in name if nothing else – represents a shift of focus from survival to growth. For a lot of businesses, this shift is just as much in mindset as it is in action.
With business rates staying high, at least until inflation and interest rates fall, the issue of cashflow remains. So the question here is how can businesses balance cashflow with investing for growth? We are helping some 11,000 business owners find this balance right now, and that’s a role we take great pride in. Businesses can’t stand still, and while the Government is taking steps to help them succeed and prosper, our role as a funder to SMEs remains vital.
