Business View: Small businesses left counting the cost

The devil is in the detail. That is the message that everyone annually forgets when it comes to Labour's pre-Budget statements. Gordon Brown was a master at it. Big giveaway in the headline, grabbed it all back in the small print. So when the Association of British Insurers said that on "first reading" the tax changes affecting their industry introduced by Alistair Darling were "appropriate and proportionate" it really should have known better.

With every day that passes, new gremlins are emerging out of Mr Darling's red box. Private equity bosses are breathing a sigh of relief that changes to capital gains tax will not unduly impact on their millions, while small business owners must be wondering what they have done to incur yet another tax hike that will undoubtedly hurt wealth creation in the UK. SMEs contribute nearly half of national GDP and have had to bear the brunt of Mr Brown's and now Mr Darling's tax hikes as the pair scrabble to balance the nation's books. Unlike multinationals, that can threaten to walk out of the UK if the taxman asks for too much, SMEs can do little to avoid the avarice of the Exchequer. Many, as our case studies (pages 4-5) show, will think twice before making that new hire, taking out a development loan or buying a rival. Gains in national productivity tend to come from SMEs and not big companies. So the next time Mr Darling boasts about doing something to improve productivity, please remember what he has already done to squash it.

Value in a Virgin

So it appears that Sir Richard Branson may ride to the rescue of Northern Rock, the mortgage lender that is currently in hock to the Bank of England. If he gets the key to Northern Rock's vault (not that there will be any cash in it), the bank will be renamed Virgin Money. It sounds too fantastic to be true, but I gather Sir Richard is serious about making a bid in partnership with financial backers. Any deal faces several obstacles, not least the requirement on the part of any buyer to refinance the £13bn in emergency funds that Northern owes the Bank of England.

So why might a Virgin bid for Northern Rock make sense? What Branson offers is a powerful consumer brand. One of the main problems facing Northern Rock is the lack of trust in its name. Images of hundreds of people queuing to get at their savings will not be displaced from the public's mind for a long time. Fancy taking out an ISA or a savings account with Northern Rock tomorrow? Didn't think so. Therefore the bank's ability to write new business in the future, should it remain independent, is severely hindered. Sir Richard, love him or loathe him, can offer the Virgin name as part of any deal, and in one fell swoop, bring value to the business.

But lets look at past Virgin deals to gain some perspective on what a Northern Rock takeover might deliver. Firstly, it would deliver even more cash for Sir Richard himself. When NTL, the shoddy cable company bought Virgin Mobile to become Virgin Media, one of the main beneficiaries was Virgin Group, which now receives millions of pounds a year from Virgin Media in licence fees for the use of the name. If Northern Rock became Virgin Money, there is bound to be a similar agreement put in place. I would also be interested to know how much capital Sir Richard intends to bring to the party. He has a useful habit as a businessman of minimising his own financial risk in a takeover deal while maximising his personal returns. In the case of Virgin Media, the name change did not alter the fact that the cable company remains a poor rival to BSkyB.

Whichever financial institution (it is looking likely to be AIG) joins Sir Richard to bid it will provide the operational nous to bring Northern Rock back from the brink. Sir Richard may have a lot of money in (offshore) banks, but I doubt he knows a huge amount about running one.

Auntie's makeover

Things may never be the same again at the BBC after Thursday. Mark Thompson will announce sweeping reforms to the corporation that will result in up to 3,000 redundancies. But from what Sir Michael Lyons was saying last week, it appears that the BBC could have been bolder. The Beeb will still be broadcasting the same hours of content, but will make fewer programmes. The fact that the BBC is a hugely inefficient organisation was highlighted nicely by Sir Michael's briefing to the media on Thursday. In attendance was one person from every major newspaper in the land. However, the BBC brought two reporters – one from BBC News and the other from bbc.co.uk.

The BBC faces a number of quandaries: it wants mass appeal, yet it wants to focus on high-end news and current affairs, drama and comedy. It wants to be innovative, yet Sir Michael says it should focus on what it does best.

Let's hope the BBC remembers its first commitment is to licence fee payers.