Jeremy Hunt’s Budget may be good for big business, but where does it leave SMEs?

Small firms feel ‘overlooked and undervalued’ after £27bn tax break for big companies

Jeremy Hunt’s measures to address worker shortages and boost investment might reassure businesses that Britain’s economy is finally heading in the right direction.

But Martin McTague, national chair of the Federation of Small Businesses (FSB), said big announcements such as investment allowances for bigger businesses – worth £27bn over three years – came without any comparable measures for his members, of whom only a tiny number will benefit.

“The distinct lack of new support in core areas proves that small firms are overlooked and undervalued,” he said. “Budgets are about tough choices, and with today’s billions being allocated to big businesses and households, 5.5 million small businesses and the 16 million people who work for them will be wondering why the choice has been made to overlook them.”

Investment allowances was one of Hunt’s centrepieces, a grand gesture designed to head off the noisy criticism – from Tory backbenchers in particular – of pumping up corporation tax to 25p in the pound from the current 19p.

It is the replacement for Rishi Sunak’s “super-deduction” and will allow businesses to fully expense qualifying investments made out of profits. A concession had been expected, but this one is better than many in the business lobby had hoped for. The CBI would have been happy with 50 per cent if combined with a longer term target of 100.

The measure will reduce the headline rate corporation tax for many – if not most – larger businesses to something quite a bit below 25p. Hunt is hoping it will move Britain up the business investment league tables – something it has long needed to do.

There was some quibbling over the three-year duration of the concession, but that makes sense given that its effectiveness and costs need to be gauged before it is made permanent. Otherwise, it has much to recommend it.

But while smaller firms already have an investment relief available to them, they need more help. There wasn’t much else in the Budget to get the blood flowing around UK plc.

McTague did give an approving nod to the measures designed to encourage people back into work, with a view to addressing Britain’s longstanding and economically destructive labour shortages. But there are real question marks hanging over their efficacy. The Office for Budgetary Responsibility described the labour supply increases from Hunt’s policies as “very uncertain”. It put the “plausible range” of new jobs between 55,000 and 240,000.

It isn’t hard to see why doubts linger. For example, there were cheers for helping parents with the cost of childcare – but for parents and the economy to benefit there needs to be more childcare available.

Then there is what the TUC calls the “elephant in the room”: public sector pay, and the public services more generally.

Public sector workers were clapped on the doorstep during the pandemic, but the government hasn’t really followed up on those displays with meaningful action. With wages badly trailing inflation, it’s no wonder they resorted to economically destructive industrial action. The disputes need resolving, but Hunt barely made reference to that.

The success of the economy and British business isn’t divorced from these problems, as the OBR’s long-term forecast makes clear. Yes, the short term is better than feared – but, even if Britain avoids a technical recession, UK plc is hardly bouncing up and down.

Meanwhile in the City, the stockmarket had stalled amid fears that Credit Suisse’s deepening crisis will prove a lot more significant than the Silicon Valley Bank collapse, and the wobbles of smaller US regional banks.

We’re not in a crisis; but the FSB has already been sounding the alarm over how many small firms could go under because of crippling energy bills. This number would be hugely increased if a fresh banking crisis does emerge. The chancellor had better be ready.