Budget offers SMEs relief, but not reform

The Chancellor’s measures on investment, skills and business rates provide short-term support, yet fall short of the systemic overhaul entrepreneurs need to thrive in a digital economy.

The Chancellor placed entrepreneurs and start-ups at the centre of the UK’s economic narrative in the Autumn Budget, an acknowledgment that is timely and deserved. Entrepreneurs are not just contributors to growth; they are the drivers of innovation, job creation and regional development. Their success shapes the resilience of the economy.

For many SMEs, the appetite to invest in expansion, technology and people hasn’t gone away. What has diminished is their access to capital and the conditions that enable confident decision-making. Rising operating costs and economic uncertainty continue to stifle otherwise ambitious growth plans.

Against this backdrop, the Chancellor’s announcement of a new 40% first-year allowance for SME investment stands out as a positive step. Enabling businesses to offset some of their upfront investment costs could unlock delayed projects and give entrepreneurs a clearer runway for growth. The impact of this measure will depend on the scope of assets that qualify. If extended beyond hard assets to include investment in software and digital infrastructure, it could be transformative.

A boost for skills

Over the past year, a troubling trend has emerged across the SME landscape: investment in recruitment, training and skills development has become one of the first areas to be cut as businesses tighten their belts, particularly in light of changes to employment legislation and the increase to employers’ National Insurance contributions.

The Chancellor’s renewed investment in apprenticeship schemes for under 25s is encouraging. Additional funding for early-career training sends an important signal that the Government recognises the role of skills in long-term business competitiveness.

As AI and emerging technologies reshape all sectors, adaptability is no longer optional; it is essential. SMEs need workforces capable of learning and innovating in real time, and young talent need pathways into industries that are rapidly evolving. The Chancellor’s measures will help restore momentum in this area, offering businesses the chance to rebuild their talent pipelines.

Business rates relief

If there is one pressure point that consistently surfaces in our conversations with SMEs, it is increased overheads. As a specialist SME lender, we see daily how these rising burdens erode margins, limit investment and in some cases threaten the viability of otherwise healthy businesses.

The Government’s decision to permanently reduce business rates for 750,000 retail, hospitality and leisure firms is a welcome step. These sectors have faced disproportionate strain in recent years and deserve targeted support.

But relief is not the same as reform. What was delivered by the Chancellor falls short of the ambitious overhaul of the business rates system that had been rumoured. SMEs across all sectors were looking for a modernisation of a tax regime that many view as outdated, inflexible and detached from the realities of operating in an increasingly digital economy. The measures announced will ease pressure, but they don’t address the systemic problems that inhibit long-term resilience and investment.

"Budget offers SMEs relief, but not reform" was originally created and published by Leasing Life, a GlobalData owned brand.

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