With the super-deduction tax relief scheme planned to come to an end on 31 March, many will be evaluating the impact of Rishi Sunak’s flagship investment incentive from his time as Chancellor.
The verdict from London’s SMEs, according to new research, is loud and clear – it didn’t do enough. Just 44% have taken advantage of the scheme, and over 1 in 2 (56%) say the Government isn’t doing enough to support SME investment.
The study, conducted by independent finance broker Charles & Dean, found over a third (36%) weren’t aware a business of their size could use the super-deduction, and almost a third (32%) say it doesn’t go far enough to encourage them to invest. And given the turbulent economic landscape, almost 1 in 5 (18%) say they can’t afford to invest even with tax break incentives.
Despite a lack of faith in the Government’s support, London’s SMEs are otherwise showing signs of optimism – while just 59% made a significant business investment last year, 96% expect to invest in 2023, with an average of £316,000 planned over the course of the year.
Simon Grace, Director and Co-founder, Charles & Dean said, “The UK has historically suffered from a stagnation in productivity, largely stemming from chronic underinvestment in the private sector. If SMEs – arguably the backbone of London’s economy and accounting for 99.9% of the business population – can kickstart business investment and fuel productivity and growth, the positive repercussions will likely be felt by the entire economy.”
Indeed, much of the planned investment by London SMEs is earmarked for growth-driving areas, with marketing spend planned for almost 1 in 3 (32%), and other priorities including plant and equipment (30%), technology and software (30%), and recruitment (28%). For 1 in 4 (24%), however, managing cash flow will be a target for investment, as the next 12 months paint a mixed picture and senior decision makers prepare to navigate what could still be a turbulent year.
With securing finance one of the key priorities around business investment, the research additionally revealed that, on average, London SMEs spent 123 hours (equivalent to over three working weeks) investigating and applying for finance last year. Given there are 1,036,000 SMEs in London, this totals 127 million hours, equating to nearly £2.6bn of time over the year*.
To meet this burgeoning demand for finance to fund SME investment in the capital, Charles & Dean has marked a significant expansion with the opening of an office in London, alongside its headquarters in Stamford, Lincolnshire. Located in Hanover Square, Mayfair, the new office will enable Charles & Dean to build on its success to date, with over £120 million of funding secured for SMEs in the last 12 months alone.
Grace added, “’Cautious optimism’ is certainly the sentiment among London’s SMEs. While they are still seeing business tick along and have ambitions to drive growth, it’s clear that external factors are having a significant impact on their outlook and overall confidence.
Even with a general sense that the Government could be doing more to incentivise investment, there is potential for 2023 to be a better year in terms of growth, with many still looking to invest. However, the underlying infrastructure must be in place to enable them to do so: the current lending landscape certainly isn’t optimised for SMEs.
Ultimately, this presents a barrier to investment at a time where it is greatly needed. As traditional lending routes become more difficult to navigate, alternative options will have to come to the fore and give SMEs access to the right finance at the right time to empower them to meet their ambitions.”
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