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Budget and SMEs

As the dust begins to settle on yesterday's Budget and various headlines seek to portray the event in a way that appeals (or gleefully horrifies) their readership, I'm struck by a glaring omission. Whether the budget was an "attack on the rich", the "death knell of a dying government", "a class war divide" or a "trap for the Tories" it doesn't appear to have been much help for SMEs.  True, most SME owners fall well below the £150k threshold for the 50% tax rate or the restrictions on pension tax relief but that's not much to sing about. I suspect that the strategic investment fund for struggling businesses will be eaten up by big biz (who represent 1% of businesses in the UK) and will involve huge amounts of red tape which SMEs have no capacity for. Maybe some of the support for the unemployed will help us employ people we wouldn't otherwise be able to afford, but I'm not hopeful and suspect the potential accusations of exploiting cheap labour (which may be true in some cases) will stifle the scheme as it has in the past. So we carry on as before. We carry on employing 50% of the UK work force. We carry on being the "engine of growth". And we carry on taking the real risks in this economy, without a safety net, and hope in vein that someone notices how important yet unheard we are. 

What does SME stand for?

I've been asked this a lot in the last week.  Apologies for the lazy use of acronyms.  It stands for Small and Medium-sized Enterprises, i.e. Small Businesses.

There are various definitions of what constitutes an SME.  But things that stand out for me (and show just how vital we are as a group to the UK - especially now) are that; 

• "out of a total of 4.8m UK businesses, less than 1% were large corporations (i.e. over 250 employees)"
  
• "the majority of the [UK] workforce is employed by SMEs. Statistics [] show that out of 4.7 million businesses in the UK, 99.3% were small firms with fewer than 50 employees, and 0.6% were medium firms with 50-249 employees."
  

So where are they and why is their voice always drowned out by the 1%?  We all know the answer is time and resource but if ever there was a time for government to make an extra effort to tip it’s ears towards the SME community….

Quantitative what?

Do any small biz people believe that Quantitative Easing will help them in any way? I think I get the idea. You make money cheap and banks will lend it more freely. But as far as I can tell there's a heavy dose of human nature at work in the behaviour of our illustrious lending institutions at the moment. When something is in short supply and you're worried about how much of it you're going to need in the near future, you get your hands on as much of it as you can, as cheaply as you can, and horde it for as long as you can. So, as before, if SMEs need credit they're going to be in trouble. And nothing HM Treasury or the Bank of England do will change this Darwinian situation until an appropriate number of weaker businesses have gone under.

Businesses that have no debt and low costs should be fine in the long run but have no incentive to expand right now until the storms look like they're passing. In the meantime we mend nets and hold tight.