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SMEs and the Budget: What’s in Store?

What will the spring Budget have in store for small businesses? The Chancellor’s speech on 20th March is only just around the corner, so what’s likely to be included in the roster for the country’s SMEs? We take a look, with the help of Deloitte, at what could be round the corner for your company.

Small and medium businesses need help to get the most out of their funding options and growth opportunities in this kind of economic climate. This includes things like business taxes and regulations, with red tape being something often seen to be strangling small businesses. There is talk that the government will, however, be targeting tax avoidance amongst SMEs, however, this could actually impact businesses sticking to the rules and avoiding loopholes.

Deloitte comments;

“It is widely expected the Chancellor will propose tightening the rules surrounding the use of limited liability partnerships (LLPs), which some unincorporated SMEs may adopt,” Debbie Griffiths, tax partner at Deloitte, commented.

“This was trailed in the Autumn Statement last year and is anticipated to concentrate upon the use of LLPs in tax avoidance. The key areas of focus may be where LLPs are used to disguise employee relationships, and, subsequently, result in an employer’s National Insurance Contribution saving. There may also be further anti-avoidance rules.

“The main concern here would be if such rules inadvertently caught genuine commercial LLP structures used by SMEs. While it is unclear what will be announced, this is one to watch out for, since it could mean material changes in the tax treatment of LLPs in the future. There is a view that legislation may be introduced and become effective from 2014.

“Since it is unlikely further changes will be made to the annual investment allowance, entrepreneur’s relief or R&D tax credits for SMEs, the main area of interest for SME financing will be the Seed Enterprise Investment Scheme. The Seed Enterprise Investment Scheme, and relevant capital gains reinvestment relief, may be extended for a further year, provided EU approvals are gained.

“This would be a welcome cash boost for small enterprises, particularly in the early stages, since it offers tax relief to individuals who buy shares in start-ups. This encourages investment into small enterprises that may otherwise struggle for external funding.”

The Name for Business

What makes a good entrepreneur? There are many qualities needed for running your own business. However, to mark St. Davids Day, Hiscox insurers conducted a survey of their SME clients from a variety of sectors to reveal some interesting facts and figures.

As well as being hard working, practical, ambitious and determined, there was one thing that many of their client had in common. According to Hiscox’s data, there were more small business owners named David than any other – this was followed by John, Paul, Andrew and Michael respectively.

The SMEs surveyed came from sectors as diverse as media, engineering, recruitment, property and charity, so the name is common across many sectors – yes, it could all be a coincidence, but David has also been highlighted as the number one name for doctors and the number two name for FTSE 100 directors in a recent survey from the Guardian Digital Agency.

Well known ‘Davids’ in the entrepreneurial sense include David Lloyd, of health centre fame, David Karp, founder of Tumblr and David Ross of Car Phone Warehouse. So, is there something in the name for business after all? As much as we’d like to say that being called David was enough to qualify you to run your own business, it’s pretty unlikely that’s the case, much like having another name will serve as no disadvantage.

What would really matter is whether or not the Davids of the entrepreneurial sector were more or less successful, clued up and well organised than others – and we all know that’s down to the individual. However, if there’s evidence that Davids show a penchant for knowing their factoring from their invoice discounting, running well maintained invoicing procedures and knowing how to grow their business, then maybe there is something in the name after all.

UK Job Market Strengthening

The UK job market has bucked the trend of doom and gloom and is now a third healthier than it was in 2010, according to the latest figures. The Reed Job Index has shown the jobs market in the UK has confounded naysayers and is in fact recovering at a good rate amongst many different sectors of the economy.

This is the largest monthly measure of conditions and trends in the job sector of the UK. The Index shows that the market has grown by 3% compared to last month. When compared to this time last year, the difference is even bigger – figures show that today the job market is 12% healthier than this time last year.

This is a positive trend across the majority of sectors in the UK economy, showing it’s a widespread occurrence and isn’t just propped up by one or two strong business sectors. 76% have grown month on month, and 91% are stronger than they were in January last year. The strongest sectors were social care, education, health and medicine.

There’s also a good picture coming from the different regions of the UK. 11 out of 12 regional areas’ employment figures grew on both a monthly and annual basis. One good example of this comes from the North East – there are not over 30% more opportunities there now when compared with this time last year. Indeed, a further 8 regions experienced growth of 10% or more.

A steadily strengthening jobs market is of course good news for the UK economy. Despite predictions of a triple dip recession, the growing strength of the jobs market for many UK businesses shows that growing business confidence could be returning and any recession is likely to be a ‘technical’ recession – two consecutive quarters of marginal negative economic growth – rather than the depths of the financial crisis.


2012 Fall in Business Insolvencies

While everything might seem a bit economically shaky at the moment, especially with the threat of a triple dip recession on the horizon, there is some good news to come out of 2012. The Business Insolvency Index from Experian has shown that during 2012 0.86% fewer UK businesses failed than the previous year – it’s not a lot, but it is an improvement!

While 2011 saw 1.10% of UK business ventures fail, 2012 saw 1.04% go under. The figures for December 2012 show the lowest rate of business failure in the last month of the year since 2007. This lower insolvency rate shows there is more stability within the business sector, with the rate of failure remaining basically flat (at around 0.25%) for each quarter.

Small to medium businesses have seen the biggest improvement. Firms with 51-100 employees saw the business failure rate drop from 2.22% in 2011 to 1.83% in 2012. This was followed by companies with 26-50 employees and those with 11-25 employees. The former saw an improvement of 0.38% with the latter strengthening by 0.25% less failures.

These figures might all be fractions of a percentage, but with so many small businesses in the UK it adds up to greater stability and a stronger small business sector. It was the largest firms who experienced an increase in insolvencies, those with over 500 employees, and unfortunately at the other end of the scale micro businesses with 1-2 employees also saw a slight increase.

Max Firth, Managing Director of Experian Business Information Services UK commented; “Following the slight upturn in 2011, 2012 has seen the business insolvency rate fall and then remain stable throughout the year. In particular, firms that suffered most during the downturn were the ones to see the most significant improvements.”

“Firms need to remain prudent in order to prosper. By sharing data with credit reference agencies, businesses can improve their own credit rating, which should also be regularly monitored to ensure businesses are in the best position to secure deals and finance as required.”


UK Manufacturers: Rising Confidence?

UK manufacturers are starting to demonstrate a bit of new found confidence moving forwards into 2013. Though manufacturing orders were flat in the three months to January, output was stable for the second quarter in a row and both orders and output are now expected to rise moderately over the next quarter. As the employment and investment picture continues to look relatively positive, this is starting to rub off on many UK manufacturers.

According to the latest quarterly CBI Industrial Trends Survey, 25% of the 389 manufacturers interviewed said that total new orders had risen; however, 28% reported orders had fallen, making it a mixed picture at best. The rate of decline in orders was, however, slower than the previous quarter at -13%.

Within total orders, exports orders fell for the third consecutive quarter (-13% compared with -17% last quarter) which bucked the expectations that they would stablise. However, it is expected that growth will resume in terms of export orders in the coming three months, underpinning a hopeful growth in total orders of +14%.

The CBI Head of Economic Analysis, Anna Leach, commented; “While domestic demand and business optimism have steadied, export demand remains a concern for manufacturers, with orders continuing to fall, albeit at a slower rate… There are encouraging signs of stability in overall demand, however, with domestic orders, export orders and production expected to rise in the quarter ahead.”

This will hopefully transfer into a growing business confidence, although optimism regarding the general business situation for the UK remains unchanged, with firms still concerned about the economic prospects of the coming year.

Manufacturing is one sector that can get a boost from invoice finance, especially in the face of struggling order books. By releasing the cash tied up in unpaid orders, it’s possible to increase cash flow and working capital making day to day survival that little bit easier.

eCommerce for Small Business

A new survey has shown that more small businesses are trading online, showing how valuable the internet is becoming to improving the prospects of the country’s SMEs. From the 2,200 companies interviewed, a 42% increase in those selling products online. There was also a 36% increase in businesses exporting their products overseas via their ecommerce sites.

This is especially significant as exporting has been hailed by the government as a way for small businesses to boost their growth in the face of tough domestic markets. The internet has also been helping start up ventures – there was a 32% increase in start ups who trade exclusively online. This shows how the internet is opening up new doors for trading for even the smallest businesses, levelling the playing field.

These figures come a year after the launch of a government scheme to encourage small businesses to export more overseas. With the high street being affected so heavily by online sales – see HMV and Comet as the prime examples – trading via the internet is becoming all important to a huge number of business sectors and is in parts starting to become the consumers’ first choice.

This survey revealed that more businesses were trading online as it was cheaper due to lower overheads, and nearly 20% said it was easier to sell their products online. However, traditional sales remain the dominant money maker, with 39% saying they make 50% or more of their sales online.

Investing in ecommerce is one way for a small business to expand its reach into the market, and even to start trading internationally. If you need to boost growth and ensure you’re making the most of the sales opportunities available to you, then trading online could be a step in the right direction.

Federation of Small Businesses in Europe

Achieving growth and boosting jobs within the small business community is one of the government’s big priorities in the coming months and years. The Federation of Small Businesses (FSB) is calling for the government and EU to focus more on the needs of the small business community in order to create a productive environment – therefore boosting jobs and growth all at once, as well as helping the economy to gain a bit of a better footing for the new year.

The relationship of the FSB with the EU is particularly interesting , especially given the diversity of opinion within the organisation about how the UK can best work with its European partners in order to get the best for the small business community. Though the FSB is neutral on the bigger questions of the UK remaining inside the EU, it is encouraging Europe to ‘Think Small First’ when it comes to business.

Having the FSB operating at a European level is helping to raise awareness of what needs to be done for the UK small business community. The lobbying group has said that its focus will always be to secure the best it can for small businesses and its members, especially when it comes to business regulations and opening up the European market for small businesses.

With exports one of the key avenues for growth that many small companies are starting to take advantage of, the work of the FSB in this area could be essential in making it as accessible as possible. First time exporters especially find it easier, regulation wise, to trade with other members of the EU, and so the FSB continuing its work to open up the market even more could lead to a greater number of businesses trading on the European stage.

So, if your business is looking to achieve growth through exporting to the European market, it’s worth keeping an eye on the FSB and all its initiatives. Europe is the most important trading partner for the UK, so if you’re looking to achieve growth, taking advantage of these opportunities could be a step in the right direction.

Manufacturing Stagnation in Q4 of 2012

While fingers are crossed that the UK avoids a triple dip recession, figures are pointing to stagnation in the final quarter of 2012, according to the British Chamber of Commerce (BCC) and the latest figures. This is not making it any more likely that we will see significant growth in 2013.

The Office for National Statistics revealed these disappointing figures. Industrial output grew by just 0.3% in November compared to the previous month’s figures. This was less than expected. What’s more, the output of the construction sector contracted 3.4% during November. The poor performance of the construction sector has been dragging UK figures down throughout 2012, and it doesn’t look like posting growth figures any time soon.

David Kern, Chief Economist of the BCC, said: “The manufacturing figures were disappointing, showing a small fall while most analysts predicted an increase. The small rise in total production was also weaker than expected, and the decline in the volatile construction sector is concerning. Taken together, the figures will reinforce the concern that the ONS will announce later this month a small decline in GDP, and this could be damaging to business confidence.”

This all paints a picture of a stagnating UK economy moving into 2013. However, manufacturing remains a significant part of the economy, and it has coped well with the challenges of the past few years, all things considered. Weak growth in world trade may limit the scope of expansion in exports, but the sector is still a big contributor to the economy and one that needs to recover.

Having access to finance is a big part of being able to achieve growth. With traditional finance options often out of reach, it’s important to consider alternative finance measures as well as bank loans and overdrafts. Asset based finance is one example, that can help unlock capital and keep your cash flow healthy.

The Future of SMEs

The world of business technology is fast moving and in recent years, a huge number of advances have become a reality for even the smallest company. From GPS navigation systems and tablet computers to the rise of increasingly sophisticated ecommerce websites, SMEs are reaping the rewards of many new technologies. But what will the near future see and how will it benefit small businesses?

Telepresence Robots

Many routine office tasks can also be done at home via video conferencing and email, but telepresence robotics takes this even further. They are relatively simple systems using cameras, microphones, screens and speakers which can give you the embodied ‘sense’ of really being in the room. This is an exciting prospect as more sophisticated technology in this area could result in eliminating the need to travel or commute at all.

The Virtual-Physical High Street

Around 37% of UK SMEs believe that in 50 years, traditional high streets and business centres will disappear. Instead, virtual-physical telepresence will be used to make a high street that exists on the internet and physically all at once. For example, a small or medium business without a fixed location could rent a shop space where it offers virtual products and services. This would combine the convenience of the internet with the human interaction of a traditional shopping experience.

Global Trading and Delivery of Products

The elimination of trade restrictions posed by currency and state borders and the emergence of multilingual and multicultural telepresence work forces could mean it become unecessary for SMEs to be tied down to one country, or to have anything like a headquarters. All the boundaries preventing SMEs from trading globally will slowly dissolve, levelling the playing field and making it easier t compete on the world market.

So, how will all this affect your business?


What does the Autumn Statement mean for SMEs?

The Autumn Budget statement was announced today, with George Osbourne setting out his plans for helping the UK economy achieve growth and stability. Aside from investment in science and innovation, what measures were announced that could directly impact your small business? We take a closer look so you know everything you need to when it comes to government finance initiatives for small businesses.

1) £1 billion has been confirmed for the funding of the business bank, which will help to address the long term structural gap in lending to small businesses. This scheme is anticipated to offer small businesses bank loans at more affordable rates, enabling them to get access to better loan options than from the big banks themselves.

2) The Regional Growth Fund will receive an additional £350 million, bringing the total available in 2012-13 to £2.75 billion. This is a considerable resource and many businesses are not fully aware of the benefits it could bring – this extra investment shows the government is keen to get more awareness going, and that it’s confident it can really help the country’s SMEs.

3) There will be extra money for the Employer Ownership Pilot, taking it to £340 million overall and giving businesses funding so that they can take responsibility for designing and developing their own training programmes. This will help to make sure staff are being trained properly, providing the SME sector with the right employees for the right jobs.

4) Increased funding of £140 million for UK Trade and Investment (UKTI) to help small and medium businesses export products and services abroad. Markets in Europe and beyond will be key to ensuring good growth for the UK small business sector in the coming years.

5) There will also be a combination of measures to help reduce the amount of red tape that small businesses experience. Hopefully this will allow both greater growth and innovation from within the sector.


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