ANOTHER year, another Budget, another gloomy picture for British enterprise. If the chancellor was hoping for the private sector to pick up the slack left in the economy by spending cuts then he must be disappointed. Among small and medium-sized enterprises (SME), it’s a story of low demand and flagging spirits. Data from the latest BDRC SME Finance Monitor – the definitive record of UK SMEs’ access to finance – show SMEs unwilling to seek finance. New targets for bank lending might make headlines, but won’t fit the reality of low demand. The data also show fewer SMEs exporting over the past year, dashing hopes of a quick export-led recovery. If the chancellor wants to get SMEs moving, he needs to work with what he’s got.
Importantly, the chancellor needs to accept that this budget is only one set of policies that should be part of a wider, longer-term policy programme designed to deliver major structural changes in the UK economy. Such policies take time to achieve their desired effect. Small business guarantees and support schemes don’t achieve success overnight and are often scuppered by the lack of time they have to bed in, or a lack of awareness. According to the SME Finance Monitor, barely over one in five SMEs has heard of the Enterprise Finance Guarantee (EFG); fewer had heard of Project Merlin. The government has this week launched a new scheme, the National Loan Guarantee. Will this scheme get the time and promotion it needs? Similarly, on Monday the Department for Business, Innovation and Skills announced significant and welcome improvements to the EFG, but this will take a while to filter through to SMEs. Awareness is key.
Elsewhere there has been consistency in policymaking leading up to this budget: successive governments have signalled that they will encourage equity investment into promising enterprises, something that’s continued under the coalition. A consensus is also forming that government will incentivise a long-term lending culture focused on growth capital – a goal that the National Loan Guarantee will contribute to if successful.
What’s important later today though is that the chancellor avoids chasing headlines. This inflates expectations, destroys consensus and sacrifices the long-term.