The Brexit circus staggers on and continues to cause deep division among politicians and business leaders – great stuff for headline writers, but a sorry spectacle for honest folk trying to earn a crust. Politicians may have been biting the dust on a daily basis, but should we care when our former Foreign Secretary, Boris Johnson, was resorting to the use of profanities as far back as June to demonstrate his contempt for UK business?
It’s hardly surprising that uncertainty and disquiet reign in the world of commerce. Big business seems to be taking the view that we have a deal on the table and, however unsatisfactory the terms may be, we should accept it because at least we know our fate and can deal with it accordingly. Others, such as SMEs, remain bewildered and feel both neglected and vulnerable.
Philip Hammond’s Budget at the end of October amounted to very little if you are the owner of a small business. Sure, the Chancellor froze the VAT threshold and he made a gesture towards encouraging investment by upping the capital allowances limit from £200,000 to £1m – but, even then, it will only apply next year. Still, perhaps we should be grateful for small mercies.
Two recent reports – one from the CBI, the other from the Federation of Small Businesses (FSB) – tell the real story. The CBI’s SME Trends Survey estimates that manufacturers are planning actually to reduce spending right across the board: a 21% reduction for buildings (the fastest decline since July 2016), minus 16% on plant and machinery, 9% on training and retraining and 5% on product innovation. If those statistics prove to be correct, what’s that going to do the Government’s Industrial Strategy? We can forget about closing the yawning productivity gap between the UK and the likes of Germany and France.
The FSB survey ‘Going for Growth’ found that around half (49%) of UK small business owners now meet the definition of ‘permanent non-borrower’ and that almost three-quarters (73%) would rather grow more slowly than borrow to expand more quickly.
The FSB report confirms that, despite efforts to raise awareness of alternative sources of finance, the UK’s four largest banks still control 80% of business lending, which doesn’t say a lot for the Government’s Bank Referral Scheme: only 902 (4.7%) of the 19,000 firms referred have gone on to secure finance.
The FSB also highlights the poor record of lending to businesses owned by women or those from ethnic minorities and draws attention to the fact that the money ploughed into SMEs by the European Investment Bank will disappear after next March when we are due to leave the EU. Clearly, there is still much to be done.
At the end of the day, business owners need to feel confident if they are to invest in the future. It’s all very well referring to SMEs as being the ‘backbone of the economy’, but the fine words mean nothing when they not supported by meaningful action.