"Our research suggests that SMEs are starting to encounter some headwinds that were not addressed by today’s announcements."
29 OCT 2021
Earlier this week the Chancellor set out a package of measures in his Autumn Statement that will provide a welcome boost to businesses. However, it was a missed opportunity to knock down barriers to some of the long-term challenges SMEs face with potential headwinds on the horizon.
Sunak heralded his announcement as the beginning of a ‘new age of optimism’. With the recovery underway, many businesses have now realigned priorities and are focused on building for the future.
Small and mid-sized businesses around the world have demonstrated incredible resilience and adaptability over the past 18 months. Sage research shows 83% of UK SMEs have returned broadly to pre-pandemic profit levels.
Thanks to these businesses – who account for around half of the private sector turnover in the UK and make up 99% of all businesses – we are emerging into the post-pandemic phase with a growing economy and stabilising public finances. The government’s ambition to create an economy founded on ‘higher wages, higher skills, and rising productivity’ gives us further reason to be cautiously optimistic at face value.
It is encouraging to see business rates relief will put money back in the pockets of the hard-hit hospitality and leisure sectors. Measures like the extension of the annual investment allowance and updates to R&D tax credits give some SMEs the license to invest in the latest equipment and innovate in new areas of digital technology. And the £3.8bn in skills spending on initiatives like the roll-out of Institutes of Technology and increase in places for digital skills bootcamps will help future-proof businesses against a lack of digital talent.
Despite some progress, what we didn’t see in the Budget was bold ambitions to accelerate a low tax, high productivity economy. Our research suggests that SMEs are starting to encounter some headwinds that were not addressed by today’s announcements. A third of UK SMEs say they are being negatively impacted by cash flow problems and limited access to finance. 33% are experiencing labour shortages while 32% are struggling with inflation.
Our research also tells us that access to finance and investment in technology will be most critical to SMEs longer term success. I recently met with a Sage Intacct customer in the travel sector that told me although his business had endured a tough period, he is optimistic because of the future possibilities he knows technology will provide to help him manage his business.
I would urge the UK Government to continue to focus on reducing tax burdens, to free up capital to invest in technology and incentivise the transition. This could be done by accelerating the promised tax reduction, extending the scope of Help to Grow: Digital to include the smallest businesses and a wider product range, as well as including digital technology as part of the Super Deduction. Digital first businesses around the world will help power the economy – increasing productivity, which will create high-skilled and high-wage jobs. But this is only possible if they have access to the right tools.
We must all collectively call for a deeper focus on helping SMEs grapple with the challenges they are facing today, otherwise risk the strong economic gains we’ve made in recent months that the Chancellor has built his Budget on. We will continue to watch with interest and do our part to speak on behalf of our customers in the UK and beyond to ensure their voices are heard at every level.