SMEs should be helped during the volatility of a European Union exit
When Philip Hammond delivers his Spring Budget tomorrow, it is expected that the overriding theme will be that of caution as the UK moves towards a formal exit from the European Union.
“Philip Hammond is right to urge caution, given that Britain has yet to feel the full force of any negative economic pressures from the Brexit process,” says Craig Drake, Head of Research for corporate funding specialists Rangewell. “The effects of a materially weaker sterling have helped British exporters, and the delays and talk of a possible second referendum helped to assuage some immediate concerns over trade with the Eurozone, but businesses should be wary of a false sense of security as we move ahead through to a withdrawal from the European Union and the Single Market.”
“However, given the Chancellor’s concerns over the need for a safety buffer for the Treasury as we move into the transition from the European Union, we hope that he will recognise the need to help British businesses, and SMEs in particular, and put them in the strongest possible position for any volatility that may lie ahead.”
“Of particular concern is the sharp rises in business rates that will affect many businesses when they kick in at the end of April.”
Announced by George Osborne in the 2016 budget, the changes to business rates and to small business rate relief (SBRR) are set to come into force on 1 April 2017.
“While the doubling of rate relief in England from 50 percent to 100 percent, and raising the SBRR threshold to rateable values of up to £12,000 will be welcomed by smaller businesses, there is some concern that the shift in taxation burden to medium-to-larger-sized businesses will choke off expansion.”
“To balance the increase in small business rate relief, the Chancellor announced that the cap would be lifted on rate increases from 12.5 percent to 42 percent. However, given the number of businesses expecting a sharp rise in rates at the beginning of April, the risk is that this will be an increase in tax that results in lower tax receipts.
“In Britain we have a very pain-free company formation process. However, the important aspect for businesses and for the UK economy is that those businesses have the ability to transition from start-ups and small businesses into larger businesses, becoming more sustainable and taking creating new jobs. As a result we are hoping that there might be something in the budget to mitigate the potential shocks caused by the proposed rate hikes and to maintain the resilience of SMEs through the transition period.”
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