The wait is nearly over. After what feels like months of speculation, the Budget is upon us, bringing with it – we hope – some semblance of clarity over what lies ahead.
And as our latest SME Pulse research makes clear, the uncertainty of the build up has had a notable impact on businesses and the brokers who advise them.
Pressing pause
Each quarter, we survey commercial mortgage brokers to get their take on the state of the sector and the attitudes of their SME clients.
We always ask them whether they are seeing demand for commercial borrowing increase, fall or stay the same, and recent editions of the survey have consistently seen a steady decline in the proportion of advisers reporting an increase.
Indeed, this is the first Pulse in almost two years where the most popular response has been unchanged demand, with half of brokers reporting interest has plateaued.
Obviously, it’s a positive that the vast majority of advisers are not seeing demand actively fall, but it nonetheless paints a picture of an increasingly cautious cohort of business borrowers.
What lies ahead
And the Budget appears to be a key driver of that caution, not least because we have been here before. Virtually all brokers we spoke to reported some level of concern among their clients about potential changes to property tax or Capital Gains Tax. In fact, more than half said their clients were ‘very concerned’.
It’s a similar story with Business Rates, where again the vast majority noted some level of concern among SME clients. As the government grapples with a budgetary deficit and having seemingly ruled out breaking manifesto pledges to close the gap, the fear is that once again businesses will be in the firing line.
That concern has influenced the decisions of business bosses. Many have opted to put off borrowing plans until they know more, with more than one in three brokers saying their clients had delayed investment decisions precisely because of the unclear picture around tax due to the Budget.
It’s a useful reminder of how important clarity is when it comes to running a business. These aren’t hypotheticals we are talking about – the people running these firms, employing thousands of people across the country, have ambitions for the future and want to pursue new opportunities. But at times when there is such clear uncertainty on the horizon, it is natural for them to adopt a ‘wait and see’ attitude, until they have a better grasp of the landscape ahead.
Going green
It’s worth remembering that for all of the taxation anxiety ahead of the Budget, there is some optimism too, particularly around green incentives.
We have seen in previous editions of the Pulse that there is a genuine drive to make energy efficient improvements and reduce energy-based outgoings among business bosses. However, what tends to hold them back are the finances involved – at a time when margins are tight, and the future is uncertain, devoting the money towards funding those improvements can feel a step too far.
The right incentives can overcome that caution. More than three quarters of brokers told us their clients would be ‘somewhat likely’ to pursue borrowing for green improvements if the Budget includes incentives, while more than one in 10 said clients would be ‘very likely’.
If the Chancellor does in fact make it easier, more economical for businesses to make green improvements then brokers may well see an uplift in interest from their SME clients.
The need for clarity
What’s obvious from this latest edition of the SME Pulse is just how important clarity is for business owners. The spectre of the Budget has loomed large for months now, and the uncertainty this heralds has understandably caused some to put off pursuing their longer-term goals.
The hope must be that once Rachel Reeves sits down, business leaders across the nation feel empowered to proceed with their growth plans, raising the funds needed to diversify, to add new staff or premises, or whatever else they have pinpointed as the key to moving onto the next level.
If we want businesses to thrive, then it’s imperative that unpleasant surprises are kept to a minimum. Obviously circumstances can change, but the clearer the road ahead is, the easier it will be for businesses to plan for the future, which can only be good news for the economy as a whole.
David Castling is head of intermediaries at Atom bank
