Ahead of a “painful” Budget expected this autumn, independent SME funder Bibby Financial Services (BFS) has revealed that small and medium sized enterprises (SMEs) consider tax incentives and access to finance as two critical areas that need to be addressed by the Government to unlock growth.
The Q3 2024 SME Confidence Tracker, which surveyed 1,000 UK businesses, found that SMEs have renewed confidence and appetite for growth, with 68% expecting sales to grow in the next six months – an uplift of 7% on the figures from its last survey in March 2024.
Business confidence has rebounded following the General Election, stabilising inflation and the recent interest rate decline, and this is set to drive an uplift in business investment.
More than half of SME leaders (52%) said they are more likely to make major investments now that the election has taken place, and 63% said lower interest rates make them feel more confident about capital expenditure.
However, amid speculation that capital gains and inheritance tax rises could be announced as part of the Autumn Budget, 87% SME leaders cite better tax incentives as a specific measure they’d like the new Government to implement.
A further 81% wanted access to low interest financing for business expansion and job creation.
Derek Ryan, UK managing director at Bibby Financial Services, said: “After a difficult four years, SMEs are finally feeling more confident to invest and grow.
“However, the Prime Minister’s warning of a “painful” Budget could undermine this confidence.
“That would be hugely disappointing, especially given the new Government’s election mandate included a plan for small business.
“The Prime Minister and the Chancellor must ensure that UK SMEs remain front and centre of the plan for economic growth.”
While data from UK Finance indicated that commercial finance approvals increased in Q1 2024, 49% of SMEs said the external finance landscape is complex and disjointed, and 80% said they would like the Government to introduce better educational resources specifically targeted to smaller businesses.
With consumers able to use free online resources like Martin Lewis’ MoneySavingExpert platform to navigate financial decision-making, two in three (65%) SME leaders wished there was an equivalent resource for SMEs.
The Labour Party’s plan for business, published in June 2024 included ambitions to improve access to finance by reforming the British Business Bank and the Bank Referral Scheme; research showed the current Bank Referral Scheme is underutilised, with just 18% of SMEs having used it, and 33% being unaware of the scheme.
Ryan said: “The Government said it would support small businesses and the devil is in the detail. Access to finance continues to be a critical issue to address, and there are some clear areas to focus on.
“Firstly, it needs to provide educational resources tailored for SMEs, and importantly, it should make reviewing the Bank Referral Scheme a priority so it can deliver the economic value it was designed to generate.
“This should include input from a wider array of SME funders and commercial finance brokers – providing SMEs with greater agency over how they finance their businesses, to allow them to thrive and grow.”
Sandeep Dhillon, CEO of SME recruitment marketplace Talmix, added: “Continuing economic uncertainty has seen cautious investors increasingly withdrawing funding from UK SMEs – notably in the tech sector.
“But SMEs play a key role in the Government’s ambitions for the UK to become a world leader in technology and innovation.
“So, to avoid a mass investment exodus, it’s more important than ever for the Chancellor in her upcoming Autumn Budget to provide much needed clarity. Investors and small businesses alike deserve fore-warning, transparency and support on potential business tax rises, such as Capital Gains Tax, and access to R&D credits.”
