Rishi's Spring Budget: SMEs, Tech and the Transition to Recovery
Updated: Mar 18, 2021
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“First, we will continue doing whatever it takes to support British people & Business through this moment of crisis. Second, once we are on our way to recovery, we will begin public finances.”
– Rishi Sunak (March, 2021 Spring Budget Announcement)
Another key area of focus will be to start building a future through which economic recovery will be attainable. These steps outline the direction with which the announcement of the 2021 Spring Budget hopes to lead the direction of the British economy. Rishi’s second budget as Chancellor pledged to continue supporting workers, also stressing that getting the economy to a position of stability would take time.
So, what did the chancellor announce in last week’s budget?
Here’s a brief summary of the key figures that were announced in relation to the business sector in a budget that “Meets the Moment”…
Business Support Bills at £53bn
Continued guarantee that workers on furlough scheme would receive 80% salary, with companies being asked to contribute 10% in July and 20% in August and September
Continued VAT reduced rate to 5% for the tourism and hospitality sector until September 2021, which are expected to go up to 12.5% from the 1st Oct up until March 2022
25% corporation tax for businesses making profits of £500,000 or more
£216m to pay for 40,000 more traineeships
750,000 retail, hospitality and leisure properties in England will pay no business rates from 1 April
Approximately 130,000 small-mediums sized businesses to be provided with digital & management tools training as part of the ‘Help to Grow’ Scheme. Any small business can apply for a £5,000 grant to pay for government approved productivity software
Total spending on business grants totalled £25bn
Such figures show that we are still very much in the ‘support’ phase of economic recovery from the disruption caused by the pandemic. The furlough scheme is protecting approximately 11 million jobs to date in an attempt not to further increase the 700,000 jobs that have already been lost. These are measures the Chancellor deems necessary to help keep businesses afloat as they gradually begin to reopen following an unprecedented year of inconsistent economic activity.
But What do these figures mean as we start to think long-term: has the Spring Budget provided a reason to remain optimistic about future business and economic prospects?
The picture isn’t as clear as the presentation of key figures might suggest and it’s still too early to make any conclusive claims, but here are a few observations that can be made as we start to think about moving the economy in the direction of recovery…
Gradual re-opening of Businesses
On the one hand, the tax break can be seen to have provided some small businesses with a bit of hope to remain optimistic that they can make it out of the pit of the pandemic – or at the very least have some breathing room to figure out the next steps as the economy gradually begins to reopen. Statistically around 70% of companies will be exempt from the 25% tax hike, although support measures are still seen by other business owners as a slap in the face for SME’s, with 1 out of 5 small businesses expected to make redundancies once the furlough scheme is ended.
Tech & Digitalisation of Work
Although not explicitly visible when analysing the key figures presented in relation to the business sector, one thing does remain clear however: as businesses begin to make their way out of their extensive periods of inactivity, technology and digitalisation will continue to transform the way that many businesses operate, with the transition into ‘hybrid working’ looking like a strong possibility to help boost efficiency. This will require the bridging of the IT skills gap to enable employees to be able to manage this combination of working from home and the workplace, as digital skills are bound to play an ever-increasing role in economic recovery. This paints a fairly positive picture for the fintech sector and entrepreneurs seeking to capitalise this moment we seem to have reached in the digital age. In the near future they will be at the heart of mobilising digital innovation, aiding businesses and employees in adjusting to this new digital working phase. Such demands have created opportunities to incentivise investment in British tech, which currently lies at the fore of making the UK a great place to do business.
Leisure & Hospitality
With the Leisure & Hospitality sector also experiencing slight breathing room having been given reduced VAT rate of 5% coupled with the extended reduction of rating supplies, this provides some reason to be optimistic as we near the reopening phase of public services. Such measures are expected to bring a boost to the sector in the reopening phase, providing opportunities for it to take advantage of the year of inaction it has had to face.
Such scope to be optimistic in some parts of the economy however don’t make up for the fact that there is still a huge amount of uncertainty looming over the question of employment once the extension of the furlough scheme comes to an end. Nevertheless, these three things remain clear:
1. As businesses begin to reopen, there is a chance to leverage on investment opportunities within the fintech sector so that businesses are more readily capable of adjusting to life post-pandemic.
2. It is imperative then, that we have an upskilled workforce with the correct technical digital skills as the role of tech plays a more important role in working life.
3. The way businesses respond to/adapt to changes at this critical transition period will have a very strong impact on the direction they take as we begin the journey out of the pandemic.