Rishi Sunak’s key economy-growing policies have been criticised for failing to promote smaller businesses, with Express.co.uk being told that many weren’t even aware of what the government was making available. One flagship policy – a “super-deduction” on tax for small and medium-sized businesses (SMEs) – comes to an end at the end of March, but less than half of them have actually used it.
Catherine Warrilow, managing director at ticket-selling SME Daysout, is looking to expand her company in the next year.
The tech start-up, which sells itself on providing a smooth and flexible way to buy tickets to experiences across the UK, aims to expand into the US and EU over the next few years – but is held back by a struggle to invest in the necessary tech.
Ms Warrilow told Express.co.uk: “Tech innovation is still a huge barrier to entry for small businesses. To develop tech in-house, we’re a million miles behind where the tech retail industry is, for example.”
She said they had not been able to make use of Mr Sunak’s policies – partly due to a lack of communication over what is actually available.
When he was still Chancellor, Mr Sunak announced a tax super-deduction of 130percent for small businesses investing in capital, heralding it as a “bold, unprecedented action to get companies investing.”
The policy effectively allowed companies to cut their tax bill by up to 25p for every £1 they invest, and was met with praise from some economists as a way to promote SME growth and meet Mr Sunak’s vision for Britain as an investment destination.
But independent finance broker Charles & Dean told us less than half of businesses they surveyed had actually taken advantage of the scheme – with many citing poor communication and a lack of faith in the government’s support.
The broker’s director and co-founder Tom Perkins said: “Incentives were, at face value, brilliant. Biggest downfall was the practical application of that in real-terms. We deal with hundreds of SMEs on a daily basis and the reality is there is a big disconnect. A lot of that has come down to a lack of support in terms of intermediation.”
Mr Perkins said his firm was currently “inundated” with businesses looking to take advantage of of the super deduction before it ends on March 31 – despite it having been available since March 3 2021.
Part of the struggle to communicate the support comes from the digitisation of banking leading to less direct contact with bank managers that previously would have advised SMEs on what financial options were available to them.
Ms Warrilow added: “The government needs to get better at communicating what’s available to who and how to access it.
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“It shouldn’t be this complicated. We do make it hard for ourselves in this country, don’t we, but as a business leader, it should be as simple as I sign up to receive updates on certain business sectors, and certain geographical regions.”
A common thread among the businesses Express.co.uk spoke to was a lack of faith in the government’s support for SMEs as a whole – which went on to limit their willingness to invest and help create the economic growth which Mr Sunak now seeks to pin as one of his key selling points.
John Sewell, founder of the crowdfunded Cosimo Art, which acts as a digital storefront for emerging artists, said the government was letting small businesses down by cancelling the super-deduction as early as it was.
Mr Sunak’s tax credit system had enabled Mr Sewell’s business to move from outsourcing to tech developers in India to a UK company. However, now it is coming to a close, that support to help Cosimo Art during an economic downturn is being lost.
The business owner said that the government’s measures weren’t doing enough to promote SMEs, saying: “Despite record levels of tech investment, the trend in recent months has been for investors to favour lower-risk, later-stage companies”.
While investment in British tech startups has hit a record £32.6 billion last year, an ever-larger proportion has been destined for later-stage companies that pose less of a risk for investors than early-stage startups.
Ms Carrilow agreed. Asked if the government was doing enough to support small businesses, she said: “I don’t really. I also don’t think what is, is accessible.
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“It’s a minefield, and then I think when it is distributed, it’s not necessarily distributed in the fairest way.”
Small businesses are particularly vulnerable to the economic trials of the cost of living crisis, with both Mr Sewell and Ms Carrilow reporting determination, but uncertainty about the future. However, SMEs make up 61percent of the UK’s labour force and turn over an estimated £2.1 trillion annually – making them crucial to the economy.
Government funding support for startups has gradually reduced. According to a report by TechNation, the proportion of funding for earliest-stage tech companies fell from 15percent of the overall investment in the UK technology sector in 2011, to 4.8percent in 2021.
This came after the government withdrew funding for TechNation itself, leading to its closure – even though the growth network had helped bring about the rise of Monzo and Revolut. The Digital Growth Grant was instead given to better-established Barclays.
Commenting on the perception from smaller businesses that the government was withdrawing some of its much-needed support by the end of the month, Mr Perkins said that Mr Sunak’s business policies had to be backed up by giving SMEs confidence.
He said: “Initiative in isolation has great tangible value, but if there’s uncertainty about the future, people are less likely to invest.”
