In the Budget announcement yesterday, Rishi Sunak set out the agenda for long-term economic recovery following the pandemic.

The tone of the Chancellor throughout the announcement was vastly optimistic. Sunak delivered a raft of new pledges and public spending commitments, while heralding the strength of the post-pandemic economy, thanks to strong growth and public spending.

But what are some of the key take-outs from the announcement for UK SMEs?

Economic outlook positive for UK SMEs but inflation remains a concern

The Chancellor confirmed that the economy is forecast to return to its pre-COVID level at the start of the year, with a 6.4% growth planned by the end of 2021.

 

Sunak explained that inflation is driven by two global forces – the first being that demand is exceeding supply across most industries as economies start to pick back up after lockdowns, and the second being linked to requirements for energy surging, putting a strain on prices and leading the global costs of oil and gas to double.

The Chancellor confirmed he is working closely with the Bank of England to implement a strategy to manage inflation.

Extension of Recovery Loan Scheme

Rishi Sunak also announced the extension of the Recovery Loan Scheme until June 2022. Launched in April 2021, the scheme was a key measure to help businesses plan their recovery post-pandemic and was initially meant to close in December 2021, although the terms of the scheme have been amended slightly.

 

The scheme is designed to either allow funding for SMEs at a reduced cost, or to facilitate loans that lenders would struggle to fund as part of their everyday ‘business as usual’ policy - including innovative, technologically advanced and green assets.

Ultimately, RLS is a stable product that is a great tool to power SMEs in their recovery from the pandemic. As well as this, the long-term impact of the scheme will be easier access to funding for assets that are at the forefront of innovation, including technology in the green space. As an SME funder, Paragon welcomes the extension of the Recovery Loan Scheme.

Business rate changes

The Chancellor announced a range of business rate cuts, with some of the sectors impacted by the pandemic the hardest (retail, hospitality and leisure) receiving a 50% discount. Overall, the tax cut is anticipated to be worth around £7 billion.

Sunak confirmed that business rates will now be re-evaluated every three years.

Rise to the Minimum National Living Wage

Sunak confirmed a 6.6% increase to the National Living Wage to £9.50 an hour, from 1st April 2022. This measure is being introduced as part of a £6 billion package to support the labour market, including investment into developing skills and a reduction of the taper rate for Universal Credit.

This pay increase aims to support millions of low-paid workers. The government is also increasing the National Minimum Wage, so young people and apprentices will also see pay increases.

Levelling up by helping businesses to innovate and grow

A range of new measures have been announced to support local and innovative businesses across the UK, as part of the Government’s ‘levelling up’ agenda.

The Autumn budget confirmed the launch of the new £1.4 billion Global Britain Investment Fund, which will help spread economic opportunities more evenly across the UK by supporting investment in the UK’s life sciences, offshore wind and automotive manufacturing sectors.

The Government is also reinforcing efforts to ensure small and medium sized enterprises (SMEs) can access the finance they need, wherever they are across the UK.

There will also be continued funding for the Start Up Loans Scheme, which provides loans and mentoring to people across the UK who want to start a business.

Apprenticeships

The Government is increasing apprenticeships funding to £2.7 billion by 2024-25.  As part of this, it is continuing to meet 95% of the apprenticeship training cost for employers who do not pay the Apprenticeship Levy, while also delivering a range of new measures.

By Spring, the Government will also consider changes to the provider payment profiles aimed at giving employers more choice over how the apprenticeship training is delivered. It will explore the streamlining of existing additional employer support payments so that they go directly to employers. It is also introducing a return on investment tool in October 2022 to ensure employers can see the benefits apprentices create in their business.