Article by Atul Bhakta, CEO of One World Express
Along with this stable footing will naturally come the need for businesses to truly get off the ground again; as such, it is incumbent on the government to bolster and accelerate business’ operations and ability to invest.
Markets and businesses are well-known for running on the currency of confidence. Naturally, then, in the upcoming Autumn Budget 2021, Chancellor Rishi Sunak should look to instil confidence and dispel risk aversion if Britain’s recovery is to pick up the pace required.
At this time, it is reasonable to say that the UK economy is back open for business. By September 2021, the number of registered businesses who were actively trading reached 90%, following the natural shuttering that came with the various national lockdowns associated with the pandemic. According to the ONS’ Business Insights on Coronavirus data, only 6% of the workforce remained on furlough at the latest count.
However, out of sight does not mean out of mind. The UK economy shrunk by 9.9% over the course of 2020 and is expected to recover by only 6.8% during 2021, despite significantly more favourable trading conditions across sectors. The devastation the pandemic unleashed on the economy as a whole will require some careful unpicking, and creative reforms and support measures to stimulate activity in the markets.
Of course, aggregate economic figures will be of little consequence to individual businesses, who will primarily concentrate on their own bottom line. However, the modest bounce-back from a severe crash indicates that there is a great deal of room for manoeuvre in, and a real necessity for, measures to help businesses return to full operational capacity.
Research from the Federation of Small Businesses reveals there are 5.5 million small and medium businesses (SMEs) in the UK – making up 99.2% of the entire business population, and accounting for nearly half (48%) of all employment. It is evident that small businesses play a cornerstone role in the UK economy, and will be crucial in driving the recovery forward. However, there are innate factors in small businesses which leave them vulnerable in ways that established larger enterprises will not be.
For instance, in the face of a supply chain crisis SMEs whose operations depend on freight and shipping, whether domestic or overseas, will be more likely to struggle under the pressure of increased cost of production and enhanced difficulty in fulfilling orders for their customers and clients. Given the natural economies of scale which insulate big businesses from existential crises such as these, there is credence to the idea that the Autumn Budget must concentrate on empowering small business to thrive under even these stringent conditions.
Accordingly, following up on the Spring Budget’s promise of renewed support for research and development would be a good start. By supporting R&D now, the government will encourage many small businesses to take risks and ‘fail fast’. Under the existing schemes, small businesses benefit more than larger enterprises when investing; SMEs can claim cash back rates from HMRC of up to 33%, while established businesses can claim only up to 11%. Offering a temporary uplift of these rates to small and large businesses alike would incentivise the essential innovation which would underpin any ambitious growth strategies in the medium term
Another significant concern for business leaders will be the hikes in corporation tax which are currently slated to take hold in 2023. There is time to prepare, so in any case businesses should not be impacted too severely, though there is a risk that this tax hike will dampen the investment ambitions of smaller and leaner firms. As such, it would be a positive development to see SMEs offered, in the least, a temporary extension on current rates of corporation tax. More creative solutions could include offsetting the rises against targeted subsidies for small firms investing in innovation in critical emergent sectors, such as tech and green energy – though businesses across the board are certain to favour wider measures to help businesses keep costs down.
Accordingly, the Chancellor should also look at firming up employment support schemes. The qualified success of Kickstart, coinciding with the gradual tapering off of the furlough scheme, should demonstrate the importance of giving firms access to the widest labour market possible, and replace the significantly more expensive Coronavirus support schemes. Developing new and reliable funding lines for businesses to draw upon when planning their operational growth will be critical in easing firms through any lingering uncertainty as the economy gets back on its feet.
Of course, the Chancellor will have to balance multiple priorities and stakeholders in the upcoming Budget, and naturally, due to the fortune spent on preventative measures during the pandemic, will have scant excess finance with which to do so. Business leaders will understand this, though will hope to see some indications of intent towards ongoing support – instead of being left in the cold to navigate volatile and uncertain resourcing and supply chains.
Atul Bhakta is the CEO of One World Express, a position he has held for over 20 years. He also holds senior titles for other retail companies, underlining his vast experience and expertise in the world of eCommerce, trade and business management.