Condy Mathias urges caution for SMEs over qualified success of Autumn Statement

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Based in Plymouth and Tavistock, accountancy firm Condy Mathias says that small and medium-sized enterprises (SMEs) could bear the brunt of new measures designed to drive economic expansion.

In his second Autumn Statement, Chancellor Jeremy Hunt’s word of the day was “growth”, announcing measures to support businesses and individuals in the wake of falling inflation – reaching 4.6 per cent in November 2023, down from 10.1 per cent at the start of this year.

Condy Mathias finds that, despite the promise of long-term gain, the short-term story could be one of continued cash flow problems for SMEs.

A notable policy change is the increase in the National Living Wage (NLW) to £11.44 per hour, a 9.8 per cent rise, also extended to 21 and 22-year-olds for the first time.

While beneficial for workers, this hike will result in escalating labour costs for businesses, driving a higher Employer National Insurance liability (despite a decrease in Employee National Insurance to 10 per cent).

SMEs may well feel the pinch more keenly than other businesses, says Condy Mathias, due to prior economic uncertainty and a lower level of financial capital compared to larger firms.

“The Autumn Statement aims to capitalise on the current economic environment to aid small businesses,” said John Hillier, Managing Director at Condy Mathias. “It has rightfully announced support for working individuals over the cost of living.

“However, the immediate effect could heavily burden SMEs, with increased wages and no employer NI reductions. Businesses will need to plan carefully in the coming months to ensure that they don’t fall into debt or financial difficulty.”

Despite an initially difficult period, however, Condy Mathias says that the Chancellor’s 110 measures for boosting the economy – which he termed his “Autumn Statement for growth” – could be the key to success for businesses looking to innovate and provide high-skilled jobs.

A permanent extension of ‘Full Expensing’ – which allows businesses to claim a deduction from taxable profits against qualifying plant and machinery capital – is set to be “hugely beneficial” to manufacturing, technology, and energy sectors, says Condy Mathias, addressing potential cash flow problems resulting from investments in capital.

Businesses will also benefit from another freeze in the small business rate multiplier, limiting any possible increase in business rates for firms with a rateable value of below £51,000.

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.

Finally, Condy Mathias recognised the significance of support for self-employed individuals and sole traders, with the unexpected abolition of Class Two National Insurance – and a reduced rate of Class Four NI contributions at eight per cent, down from nine per cent.

John finished: “Post-Autumn Statement, business owners face a tricky situation.

“While the Chancellor’s focus on investment and growth is clear, the immediate challenges for SMEs are there for all to see. Employers must manage cash flow carefully amidst rising wages and NI contributions to benefit from the Chancellor’s long-term support measures.

“However, not all sectors will equally benefit from the new policies, requiring careful financial planning. As SMEs navigate these changes, professional guidance will be crucial in overcoming short-term financial strains and optimising the benefits of the new measures.”

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