BUDGET 2016: Paul Statham, founder and chief executive of fast-growth medium-sized enterprise Condeco, has outlined how the Budget can help SMEs, saying that it is looking to raise revenue but, since 99.9% of British businesses are SMEs, there must be a focus on helping them to grow.
“The chancellor’s focus in this Budget is expected to be on raising revenue, but the recent slowdown in the British economy suggests that there is a more fundamental need to boost growth.
“99.9% of British businesses are small or medium-sized (SMEs), and fast growth from enterprises of this kind is key to the future of the economy. One of the biggest factors making growth difficult for medium-sized businesses is the continued weight of business rates, which often make the cost of expansion prohibitive. The small business rates relief which has meant small firms have been exempted from the tax since 2014 should be extended in order to nurture the potential of these businesses.”
Statham also said that he believed property to be the second largest outlay for most businesses, behind the cost of personnel, and the burden of business rates damages the growth potential of Britain’s many enterprises.
“Companies can examine more closely their real estate needs, but there comes a time when growth cannot be sustained without the possibility of expansion in physical property. The chancellor must look long and hard at his policy of revenue raising to be sure that it will deliver the best prospects for the country in the future,” he said.
Randeesh Sandhu, chief executive of residential development finance provider Urban Exposure, gave his Budget 2016 wish list, which includes the reversal of recent government stamp duty changes. “Recent UK stamp duty reforms are having a damaging impact on the housing market and should be reviewed.
“Buyers are piling in ahead of the latest stamp duty reform that will see a 3% surcharge introduced on buy-to-let properties at the start of April. But these figures mask the true impact that the Stamp Duty Land Tax (SDLT) reforms have had on prime markets, and the subsequent knock-on effect on the wider UK property market,” he said.
“The SDLT changes announced in the 2014 and 2015 Autumn Statements have already notably dented the confidence of both domestic and foreign buyers and investors who will be wondering: what next? Even the Treasury itself has lost over half a billion pounds in revenue during the period as a result of the changes.”
He believed it to be, “a matter of time before a loss of confidence at the top end translates into harming the market lower down”. He said: “Before it is too late, the government should rethink its approach to stamp duty and reverse recent changes that pose a genuine threat to future market growth and indeed its own revenues.”
Sandhu also wants to see more pragmatic support for SME developers. “There have been a string of policy announcements to help smaller developers over the past two years. With some 50% of current housing delivered by large housebuilders, assistance for SME developers is necessary, welcome and perhaps well-meaning. However, how effective will the policies be in practise? What have been the results for example, of the Housing Growth Partnership – a 50/50 fund set up by Lloyds and the government for £100m in 2014?”
Sandhu believes the £1.2bn fund committed in Jan 2016 aimed at enabling SME housebuilders to build 30,000 homes on brownfield public land is a “step in the right direction”. He said: “The funds are designed to encourage SMEs to take on projects they were previously unable to by offering sites with planning permission from public land. But with current proposals covering for only 13,000 homes directly commissioned by the government across five sites, this is barely a drop in the ocean against targets.”
He added: “Moreover, with many of these sites financially unviable due to end values, or having other complexities such as poor infrastructure and remediation requirements – on top of the wisdom of “direct commissioning” itself – the announcements smack of politicking and not actual, meaningful housing delivery.”
Sandhu says that to truly address the housing crisis facing the UK, the government needs to be “more pragmatic in its approach to supporting small and medium-sized developers – on funding the solutions to the viability gaps on these sites, investing in the required infrastructure, and bolstering the HCA’s coffers so they can provide funding alongside private financiers.”
He also wants to see a new approach to financing brownfield sites.
“It is estimated that there are 66,000 hectares of brownfield sites in England, with one third in the high growth areas of London, the South East and East. In London alone, it is estimated that a further 365,731 new homes could be built on brownfield sites.
“Many of these sites will be developed in public/private partnerships and will require specialist financial structures possible only through a thorough understanding of development and security, so that financiers can get comfortable with the revenue and risk of the projects. Yet some of the most innovative financiers in today’s market such as alternative non-bank lenders are not invited to the table. Working with a greater number and variety of financiers could be the key to unlocking development of brownfield sites and the government should recognise this going forward.”
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