SMEs welcome move to confront 'twin problems'

Nov 25 2008 by Karen Dent, The Journal

SMALL businesses in the North East welcomed the Pre-Budget Report's pledges to improve cashflow and access to finance for SMEs.

Chancellor Alistair Darling was keen to show his concern for the problems faced by businesses he called the “engine of our economy”.

He said: “They also are facing continuing difficulties with cash flow and credit. I know many profitable businesses are concerned that these twin problems threaten their future. I am determined to help them.”

He announced additional finance to help cashflow problems. Small business were given greater flexibility and more time to pay taxes, including VAT, corporation tax, income tax and national insurance.

The small business rate of corporation tax was frozen for 2009 and there is also a “holiday” for 2009/10 on business rates on empty commercial properties with a rateable value of below £15,000.

The Federation of Small Businesses (FSB) regional chairman Colin Stratton welcomed the property rate relief. “We have spoken on numerous occasions to chief whip and Regional Minster Nick Brown who is a great supporter of small businesses and this policy is down to his support for the FSB. It will be of great assistance to small businesses in the North East,” he said

On the issue of cashflow, Mr Darling said the Royal Bank of Scotland, which had pledged not to increase pricing on SME overdrafts prices for at least a year, should be held up as a benchmark. “We are closely monitoring this commitment by banks to treat business customers fairly and decently. I will take whatever action is necessary to make sure this happens,” he said.

The FSB said the Government must monitor the banks’ behaviour to ensure they loosened the purse strings.

Further money will be available via £4bn from the European Investment Bank to provide funds to banks to lend to SMEs. Seven banks have requested money from it.

The Government itself is offering cash through a temporary Small Business Finance Scheme. Mr Darling said it should allow SMEs to borrow up to £1m at more flexible terms.

The FSB has been lobbying for a similar fund and NECC head of policy Ross Smith said: “There has been a lot of focus on the interest rates people have been charged but one of the key issues has been the availability of money.”

But manufacturer Geoff Baxter, who runs Stokesley-based Baxter Promotions with his wife Chris, said that Mr Darling should have done more to make customers pay on time.

He said: “It would have been better if he had brought down the time it takes when customer have to pay. The 60 to 90 days, that should be outlawed.”

The company, which supplies promotional items such as pens and mugs, is keen to expand and Mr Baxter welcomed moves to ensure the banks free up access to finance. But he added: “It doesn’t matter what they do, it’s going to be tough. we’ve just got to grin and bear it.”