Rishi Sunak’s Spring Budget on Wednesday delivered some killer blows to many working-class people who were already struggling to get by. But what about the effects on small-medium sized enterprises (SMEs)?
5p fuel cut – is it enough?
Fuel duty will be cut by 5p per litre which is actually the largest cut in history. These measures will be in place for 12 months. It will reduce the fill of an average tank by £3.30; diesel has risen to £98.43 and petrol to £91.87.
However, with the cost of fuel set to rise quickly once again, that drop could quickly be cancelled out by rapid rises in the not too distant future.
This could cause problems for companies that heavily rely on cars. Taxi firms and haulage companies may have to adjust their costs to combat the expected rise in costs, as many have done already.
Clara Challoner Walker, a small business owner, told the i: “I had hoped there might be more help around [energy] costs for small businesses – we can really see the difference in our electricity and fuel costs year on year, and we are very efficient in our usage.”
“We see our courier prices increase by the day because of the price of fuel,” she added.
Paul Jones, owner of a brewery in Manchester, was also concerned that the record cut in fuel prices might not be enough.
“We have a fuel crisis that’s going to hit us with 200 to 300 per cent [cost] increases. It hits our entire supply chain, every single thing we buy from grain to hops – all of this is going to have an impact,” Jones said.
“We’re two years into a pandemic that’s absolutely decimated the industry. A lot of my peers are deeply, deeply worried, the recovery of our trade is extremely slow.” The web of costs is all inextricably linked. Transport costs rising will cause the costs of products and services to also rise accordingly, as businesses look to cover their outgoings.
Business Rates Relief
From April 2022, the Chancellor announced the start of two new business relief rates: one covering a variety of green technology and another at specific heating networks. This has been forecasted to save £200-million over the next five years.
The Chancellor will work with SMEs at the end of this period to decide what the best options are for this going forward.
One suggestion that Mr Sunak has suggested is to change the tax system to work with training employees. On average, UK businesses are far less likely to train employees than businesses across other European countries.
Sunak also wants to provide relief to Research and Development sectors. Existing tax relief is set to be reformed, providing better value-for-money for the taxpayer whilst making a better difference for businesses in this sector.
50% off for certain sectors
The budget also announced 50% business rates relief for eligible businesses that are in:
- Retail
- Hospitality
- Leisure
These measures come into play in April and are worth £1.7 billion for small businesses. This is alongside the Help to Grow Management and Digital schemes, worth thousands of pounds for each business represented, and the £1 million Annual Investment Allowance that is open to businesses in Britain.
Employment Allowance
The Employment Allowance is a relief that allows smaller businesses to reduce their employers National Insurance contributions bill each year – going from £4,000 to £5,000. This £1,000 reduction is worth £500,000 for smaller businesses and it starts on April 6.
This move will stop 50,000 businesses from paying NICs and the Health and Social Care Levy, taking the maximum number of firms not paying NICs and the Levy up to 670,000.
VAT rise for hospitality
Sunak’s announcement of a rise in VAT for the hopstiality sector will not go down well with pubs and restaurants.
Hospitality was one of the hardest hit sectors during the pandemic because it relies on people coming in and using the service in-person. There was no virtual alternative.
As a result, the Chancellor was allowing for a fixed VAT of 12.5% for hospitality businesses. However, the Spring Budget announced that this figure will increase back to its normal rate of 20%.
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