Business groups have urged chancellor Jeremy Hunt to include measures to support economic growth in his Autumn Statement next week to help Britain’s smallest companies ride out the downturn.
Smaller businesses are expected to be particularly hard hit by several of the measures that Hunt is expected to announce as part of the Treasury’s efforts to tackle a looming gap in the public finances.
Ministers are set to scale back or close a flagship productivity scheme introduced by prime minister Rishi Sunak when he was chancellor aimed at boosting management expertise in smaller companies, according to people familiar with the matter.
The Help to Grow programme, which was only launched last year, was a key part of former prime minister Boris Johnson’s levelling-up plans. The state-funded management training scheme aimed to sign up 30,000 SMEs for “world-class business training” over three years.
Hunt also plans to extend the freeze on the £85,000 value added tax threshold for another two years until 2028, according to officials, dragging thousands of companies into paying the levy for the first time.
These moves will be accompanied by a wider package of tax hikes, including increasing corporation tax to 25 per cent from 19 per cent and a rise in the dividend tax.
Business groups, including the Federation of Small Businesses, Make UK, CBI and Institute of Directors, met Sunak and Hunt on Friday.
Those familiar with the talks said that the chancellor “managed expectations” about pro-business policies next week, indicating that the markets were calmer but the government needed to take action to project the most vulnerable in society.
Speaking before the meeting, Craig Beaumont, chief of external affairs at the FSB, said there was a “real risk that this [would] be an anti-growth and anti-business set of policies that are designed to do no more than stop the problems rather than build for the future”.
He added: “There is little so far that we can see that will support growth or encourage investment, where the UK is already languishing near the bottom compared to rival nations.”
Shevaun Haviland, director-general of the British Chambers of Commerce, urged the government to “create stable conditions for businesses to invest and grow, otherwise we will be starting from a very weak base to power our recovery”.
Make UK, which represents the UK’s manufacturers, said that the Autumn Statement was an “opportunity for the new government to support manufacturers through this extremely challenging period, as well as, crucially, put in place foundations for our recovery”.
Business leaders are particularly concerned about the impact of the VAT threshold freeze on growth, pointing out some small companies opt to temporarily halt operations rather than exceed the £85,000 turnover threshold, which has been frozen since 2017.
The FSB estimates that about half of small businesses — more than 2mn companies across the UK — fall below the VAT threshold. Beaumont said some business owners choose to cap their annual revenues as they approach the threshold, rather than pay the tax.
Business groups also want the government to abandon or phase in the sharp rise in business rates next April, which would bring in an extra £3bn to the Treasury. The annual increase in business rates is dictated by the consumer price index inflation measure from the previous September, which hit 10.1 per cent.
Ministers are considering whether to introduce an online sales tax, which could be used to fund business rates relief for the retailers. Internal government estimates suggest that a 1 per cent sales-based levy on online goods sold by companies with revenues of more than £2mn would raise about £1bn a year.
The Treasury said that at the meeting on Friday Hunt told business leaders “that although tough decisions lie ahead, the government [was] committed to driving down inflation and helping businesses invest and grow”.
The Treasury declined to comment about any specific measures in the Autumn Statement on November 17. But one official pointed out that the UK’s VAT registration threshold was more than twice as high as the EU and OECD averages.
