The Chancellor has delivered a budget for business, whilst extending a helping hand to people threatened by Coronavirus. But he is also investing in science, and tackling climate change in the hope of creating a more sustainable and competitive economy. Then there’s the infrastructure investment, much of which is spread across the North to level up opportunity. With increases planned in the minimum wage and reductions in national insurance, there is a promise of higher spending power for the less well off in the short term as well as a higher productivity and higher wage economy in the future.
All this comes, of course, at a cost.
The budget ticks a lot of boxes on a lot of wish lists, but is it sustainable? The Chancellor says it is and the Office for Budget Responsibility supports him. He depends on two assumptions; one clearly stated and one silent.
The first is that the Coronavirus will be damaging to the economy but short lived. With the support he is offering to business and workers there is a good chance of that being true, but some businesses may be too weak to withstand the shock, even with such help.
The silence comes on the Government’s ability to secure good trade deals with the US, the EU and others. It is fair to say that there is nothing much to be said at the moment on the likely outcome, but whether this budget is judged majestic or plain reckless in future depends on this as yet known unknown.
FLA members play a huge role in the engine room of the economy, providing the finance that underpins much consumer spending and business investment. On the business side they support SMEs to the tune of £20 billion new lending a year for investment in plant, machinery, equipment and software, and £36 billion for all firms. They will play a big part in enabling the huge construction, housing, education and research programmes announced today. Many however are not banks, and as such cannot call on the Bank of England’s support for emergency business lending. This reduces the impact of the Bank’s scheme and should be rectified. And at the same time the Government should address the bureaucratic processes built into consumer credit legislation that make it unnecessarily difficult for those lending to SMEs to produce simple contracts and quickly arranged payment holidays.
We were very pleased to see in the Budget more financial support for the 38 Growth Hubs that assist SMEs on a range of issues. This is what we’ve been asking for, and should help to ensure that firms get the right information at the right time when they’re looking for finance.
No budget will satisfy all, but this is a good start by a new Chancellor, delivered in challenging circumstances, including those of his own appointment. A little time spent opening a couple of extra doors in the credit market will boost the delivery of his goals even further.
We’ve received clarification that the temporary Coronavirus Business Interruption Loan Scheme will include non-bank lenders. This is good news. But the fact that the Bank of England’s Term Funding support will only be available to banks is a missed opportunity to get funding to as many SMEs as possible.
Published 11 Mar 2020