Budget 2011: a budget for small business?

By: Rachel Miller

Date: 25 March 2011

This week's Budget speech was full of references to enterprise, start-ups and growth. But it remains to be seen just how much George Osborne's budget will actually do to help small firms in the UK.

Like every Chancellor of the Exchequer, George Osborne has had to try and deliver something for everyone - and in business terms that includes local shop-keepers and high-growth technology firms, big businesses and the city.

But while there was some good news for small businesses - and lots of talk about helping entrepreneurs - many of the substantial changes look set to benefit large companies.

In fact, as Robert Peston noted in his BBC blog, this was a budget for big businesses.

First and foremost, the surprise two per cent reduction in Corporation Tax is good news for big companies. But what about the small business rate? That drops one per cent (as previously announced) to 20 per cent but there's no extra reduction for small firms in this Budget.

The relaxation of planning restrictions will be music to the ears of some of the UK's largest corporates such as supermarkets and construction firms. But will it really make a great deal of difference to the average small business?

George's big moment was the announcement that fuel duty would be reduced by 1p, effective immediately. In addition, the planned inflation rise in fuel duty due in April was delayed and the annual 1p above inflation "fuel escalator" rise was scrapped until 2015.

But these gestures mostly represented a chance to grab - and make - the headlines with the clever message that this is the Budget that "fuels" growth. Do you see what they did there?

In fact, the price of petrol has gone up by 17p in the past 12 months and the price of diesel has risen by 23p. That's the reality on the forecourt for small firms.

Good news from the budget for business?

OK, yes we're getting 21 new Enterprise Zones - but how these will work has yet to be revealed.

And yes, from April, there will be a moratorium exempting start-ups and all businesses employing less than ten people from new domestic regulation for the next three years. That's just new legislation, mind.

And yes, the tax code is being simplified, with 43 tax reliefs being abolished. Call me cynical, but I would bet these are the 43 most obscure parts of the tax code - the removal of which may not radically reduce red tape for the average business.

OK, the government has agreed with the banks a 15 per cent increase in the availability of credit to small businesses. But how that translates into real lending remains to be seen. Does that mean that your business will get the lending it needs to invest in people, product development, equipment, stock - all necessary for growth.

Then there's the merging of National Insurance and Income Tax. With NI costs rising, this sounds like a plan that could make a very real difference to SMEs. But it's only a consultation. And the government is looking at merging the administration of NI and income tax, not necessarily fully merging the two systems. And anyway, it's going to take ages…

Budget 2011: Substance or soundbites?

Much of the talk about encouraging enterprise in the Budget was full of soundbites - tell the world, "Britain is open for business", we are making the UK "the best place in Europe to start, finance and grow a business" and this is a "budget for making things not for making things up".

But soundbites don't fuel growth. And, as important as Wednesday's Budget was, the effect of the sweeping cuts is about to be felt. With this year's growth figures revised downwards, we've got a long way to go.

Rachel Miller, editor, Marketing Donut.

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