News and Events

Chancellor delivers grim verdict

30/11/2011

The gravity of the economic crisis that continues to grip the country was underlined yesterday as the independent Office for Budget Responsibility (OBR) dramatically downgraded its growth forecasts for the UK economy, with overall growth of just 0.9% predicted in 2011 and only 0.7% in 2012.

Whilst it believes the UK will avoid the dreaded double-dip recession, Chancellor George Osborne confirmed that events in the Eurozone could prove the decisive factor in his Autumn Statement, in which he revealed that the long-term gain he promised last March is even further away.

Understandably, UK businesses were given much attention by the Chancellor as he outlined several measures designed to improve their access to finance and ease the restrictive burdens on owners currently.

As expected, the introduction of a £40 billion credit easing programme was confirmed to underwrite bank loans to small businesses under the National Loan Guarantee Scheme, in what Osborne labelled as “the most ambitious plan ever to get loans to small businesses”.

This is hoped to reduce the cost of borrowing by around 1%. But whilst it will serve to address one challenge SMEs face with regards to funding, the extension of the Enterprise Finance Guarantee scheme to enable firms with a turnover of up to £44 million to apply for government-backed funding is hoped to provide further access to finance.

Similarly, a new £1 billion business finance partnership will help medium-sized businesses access finance for investment, whilst the Seed Enterprise Investment Scheme, which will provide new start-ups investing over £100,000 with a 50% Income Tax relief and waive any tax on capital gains during 2012, should encourage budding entrepreneurs to set up a new business.

And while the government’s promised consultation on merging Income Tax and National Insurance could lead to a reduced administrative burden on SMEs, the cancellation of January’s planned 3p hike in fuel duty will provide further respite for UK manufacturers and hauliers in particular.

Osborne concluded by saying these initiatives demonstrate the coalition is “a government determined to help small businesses”, but it remains to be seen how much of an impact they will have on triggering sustained growth in the months and years ahead.