Why is the Pre-Budget Report bad news for SME’s?

Last week (9th December) Alistair Darling announced the Pre-Budget Report and there was both good and bad news for small businesses in the UK.

The Federation of Small Businesses have even accused the Chancellor of “giving with one hand and taking away with the other” following the PBR. The end to the export guarantee scheme and the increase of the Small Business Rate of Corporation Tax were both deferred, while businesses earning profits derived from UK patents saw their tax reduced to 10%. Of course, these points came as welcome news to many but even this couldn’t hide the fact the PBR was ultimately bad news for SME’s.

The hike in National Insurance by a half a percentage point from 2011 has been branded as “an attack on jobs” by many frustrated SME’s. This hike comes on top of the half percentage rise which was announced in 2008 and will affect companies, staff and the self-employed. The combined rise will pull in £7 billion extra annually and will only affect those who earn more than £20,000 a year.

It’s feared thousands of UK SME’s could bear the brunt of this combined rise which will see them having to shell out more in staffing costs at a time when many are already struggling to survive. The tax hike sparked an angry reaction from many bodies, including the CBI and British Chambers of Commerce.

Steve Radley, Director of Policy at the Engineering Employers’ Federation, said; “Given the increase already in the pipeline, this measure is a further tax on employment which will do little to help employers create jobs just as the recovery will be gaining pace.”

Alistair Darling also announced plans to extend the Enterprise Finance Guarantee Scheme, which offered government guarantees on bank loans to more than 6,000 firms.

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