Spring Budget: Mixed reaction from SME lenders
Small- and medium-sized enterprise (SME) lenders have given a mixed reaction to the Spring Statement, welcoming cuts to taxes and the expansion of research and development (R&D) but calling for more action.
Chancellor Rishi Sunak (pictured) announced a five per cent cut on fuel duty per litre and a temporary 50 per cent business rates relief for eligible hospitality companies up to £110,000.
He revealed plans to raise the threshold at which people start paying National Insurance to £12,570 in July and to reduce the basic rate of income tax from 20p to 19p per pound by 2024.
The Employment Allowance, which gives relief to smaller businesses’ National Insurance payments, will rise from £4,000 to £5,000 from April and the government will reform research and development (R&D) tax credits.
Ravi Anand, managing director of alternative lender ThinCats, said that businesses will benefit from the cut in fuel duty, but despite government support insolvencies will rise over the coming months.
Read more: Wave of insolvencies predicted next year
“Most are aware and wary that inflationary costs will have to be passed on to their customers, so anything to reduce the pain is helpful,” said Anand.
“There is of course an interest in improving productivity and reforming business taxes, but we will have to see the detail when it appears.
“Smaller businesses borrowed considerably more compared to mid-sized businesses, yet their working capital is in a significantly weaker state. Even with some of the measures announced today, it is likely we will begin to see an uptick in insolvencies in the coming months.”
Kasper Larsen, co-chief executive of fintech platform YouLend, said that SMEs suffering from inflation can seek finance from alternative lenders.
Read more: New inflation rise makes cash savings “impossible”
“It was only a few months ago that the Federation for Small Businesses declared an SME crisis,” said Larsen.
“Telling SMEs that the path to success is through investment in innovation is all well and good – but when many are struggling to just keep their lights on, investing requires cash flow support that they simply don’t currently have access to.
“For SMEs, this sort of volatile environment means it will be absolutely vital to extend their financing options and put some cashflow management measures in place.
“The answer could lie in alternative finance. Having proven its salt through the pandemic, offering a lifeline to business owners while government support was too slow to the mark, the new world of lending, defined by speed, flexibility and inclusivity, is here to stay – and could be the answer that SMEs were looking for, and didn’t find, in Sunak’s Spring Statement.”
Maddy Alexander-Grout, chief executive of discounting specialists VIP Rewards, welcomed the expansion of R&D and 50 per cent cuts on business rates but said companies will feel even less confident about the future.
Read more: SME lending was “muted” in the fourth quarter
“Crucially, nothing was announced for small businesses that don’t pay rates, who need grants to help them to recover from the pandemic,” she said.
“And employers will feel the pinch on employers’ contributions. This will leave businesses feeling even less confident about the future.”