Eastern Powerhouse: The Autumn Statement focused on stability but failed to deliver on growth

Opinion | Candy Richards, Eastern Powerhouse board member and development manager at the Federation of Small Businesses

Right now, the headwinds that many local businesses are facing feels gale force – and the support they were hoping for from the Chancellor’s autumn statement is sadly in short supply. Although the statement rightly aimed to bring stability back to the economy, it neglected another crucial priority in the process: the need to create a climate that is conducive to long-term growth.

Indeed, in many ways the budget was ‘high on stealth creation and low on wealth creation’, as my colleagues and I at the Federation of Small Businesses (FSB) have been saying. It also represents a huge missed opportunity to avoid further economic slowdown, and this oversight will be felt most in local areas that are already lagging behind where they could be.

In the East of England, for example, we have one of the highest numbers of businesses in the country, and more than 99 per cent of these businesses are classed as a small or medium-sized business (SME). This rich ecosystem of companies creates jobs, sustains the local economy, and forms the backbone of local communities.

Unfortunately, many of these businesses are now contemplating the stark reality that they won’t make it through Christmas – and the Autumn Statement did little to allay fears.

Take the slashing of dividend taxation allowances, which was one of the major disappointments from the new budget. Many owners of small limited companies rely on dividends rather than a salary to make a living, and so this slash came as a bitter blow. These were the same business owners who were excluded from direct support during Covid, and more recently were pushed out of the cut in national insurance as well.

Stealthily freezing the VAT threshold at a time of sky-high inflation is also a misguided measure and will drag more struggling small firms into scope for the tax, whilst disincentivizing others from growing. In fact, FSB’s research shows that one in four small firms and the self-employed (24 per cent) are held back by the VAT threshold.

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Other measures are cause for concern as well. For example, in the East of England, we are home to many cutting-edge start-ups which rely on the research and development (R&D) tax credit scheme to operate. Therefore, the gutting of this scheme poses a real risk of crushing our region’s best and brightest businesses before they are even off the ground. Last year, companies with fewer than 250 employees contributed £24.3bn in investment in R&D, an increase of £4.3bn from 2018.

However, the autumn statement was not all doom and gloom. One saving grace was the retention of the employment allowance at its current level, which was hard fought for by the FSB. The continuation of the lower national insurance rate for the self-employed and employees was also a small but important win.

Equally so on business rates. The news is that transitional relief will be changed alongside next year’s revaluation and inflationary freeze – avoiding the threat of a huge 10.1 per cent increase in bills. The positive effect will be for those whose valuations go down, who will now be paying a fairer level of rates from year one.

The significant expansion of relief for small firms in retail, hospitality and leisure was also an important and necessary step – with many businesses in these sectors currently on the brink of collapse due to sky-high energy bills. The energy support package offered to small firms will reportedly remain in place until April, helping them through a potentially very tough winter.

However, it is vital that this support isn’t limited to just specific sectors – and should be based on the size of a business as well. Our recent report showed that one in four small firms plan to close, downsize, or restructure if energy bills relief ends in April next year.

The FSB and its partners at the Eastern Powerhouse are therefore working to ensure that the government understands the importance of supporting small businesses in the East of England and beyond – which deliver 16 million jobs in the UK and about 50 per cent of the annual turnover in the UK private sector.

Although the Chancellor might believe that the Autumn Statement has succeeded in steadying the ship after recent economic turbulence, he must understand that setting a course towards recovery, enterprise and innovation is also key. Whether that direction is set in the coming months is a decision which will be make or break for many small businesses – and by extension the government’s long-term growth plans.

Candy Richards is development manager at the Federation of Small Businesses and also sits on the board of the Eastern Powerhouse.