Chancellor’s Autumn Statement is a double-edged sword for SMEs, says Clemence Hoar Cummings

The Romford-based accountancy firm Clemence Hoar Cummings warns that measures announced by Chancellor Jeremy Hunt in the Autumn Statement could hit small business cash flows before they feel the benefit of new measures.

In the wake of falling inflation – reaching 4.6 per cent in November 2023 from 10.1 per cent in January – and anxiety around high interest rates, the Chancellor outlined his “Autumn Statement for growth”.

Reviewing the Government’s new fiscal policies, Clemence Hoar Cummings says that, while businesses will benefit in the long term, it may cost some significantly.

The rise in the National Living Wage (NLW) will bring increasing labour costs for businesses, with a 9.8 per cent rise, to £11.44 per hour. This has been compounded by the extension of the NLW to 21 and 22-year-olds for the first time.

Rising wages will also carry a higher Employer National Insurance liability, despite a reduction of Employee National Insurance to 10 per cent to the benefit of workers.

Small and medium-sized enterprises (SMEs) are likely to be hit hardest as they often lack the profit margins and financial buffers of larger firms.

David Bransbury, Director at Clemence Hoar Cummings, said: “Despite a major emphasis on leveraging the current economic climate and creating opportunities for small businesses, policies within the Autumn Statement will place a heavy burden on SMEs in the coming months.

“Working people will be rightly supported through higher costs of living with rising wages and reduced NI contributions, but businesses seem poised to pay the price, particularly with no NI reductions to employer contributions.

“This is particularly true for sectors that rely heavily on labour or those that already operate with low profit margins.”

However, despite a bleak short-term outlook for SMEs, the Chancellor’s 110 measures for the coming year may yet bolster surviving small businesses through a long-term commitment to growth, says Clemence Hoar Cummings.

In an unexpected development, the Chancellor announced an indefinite extension of ‘Full Expensing’ allowing capital-reliant businesses to claim a deduction from taxable profits of up to 100 per cent of their expenditure on qualifying plant and machinery capital.

“This extension will be hugely beneficial to manufacturing and related sectors, as SMEs that rely on investment in capital can suffer cash flow problems,” said David.

In addition to support for internal investment, high-growth sectors including technology, sustainable energy and manufacturing, will benefit from significant investment from the Treasury, with £975 million being made available for the automotive sector, £520 million for life sciences and £960 million for clean energy manufacturing.

The UK’s smallest self-employed businesses are also benefitting from the Chancellor’s announcements, with the unexpected abolition of Class Two National Insurance – and a slashed rate of Class Four NI contributions at eight per cent.

David concluded: “Many business owners will have mixed feelings after the Autumn Statement. While the Chancellor placed heavy emphasis on securing investment and growth, SMEs may not feel the benefit for a while yet.

“Employers will need to consider their cash flow carefully to avoid being hit by rising wages and NI contributions in order to reap future benefits of targeted support for key sectors.

“Furthermore, some sectors – such as professional services – will not benefit as significantly from upcoming investment projects or full expensing, so they will have to think carefully about optimising future financial plans.

“Changes within the Autumn Statement will have potentially massive impacts on SMEs and business owners. Professional advice is key to weathering the upcoming squeeze and maximising the benefits of new measures.”

To find out more about Clemence Hoar Cummings’s full range of accounting, tax and business advisory services, please visit www.chc.uk.com.