What the Chancellor didn’t tell you

AUTHOR: Andrea Reynolds, Founder and CEO at Swoop

Political theatre and economic policy are not the same thing. Andrea Reynolds, Founder and CEO at Swoop responds to some of the lesser-noted changes in the October ‘21 budget

The Chancellor of the Exchequer’s budget speech to the House of Commons is one of the key dates in the political calendar. Written to showcase good news and generate positive headlines for the incumbent government, it presents the attractive illusion that there are no downsides to current government policy. 

Everything is getting better and you’ve never had it so good.

And then you read the detail and realise things maybe aren’t so rosy. The things that will really have an impact are often glossed over or tucked away in the small print: no politician wants to stand in front of the nation and tell them that this is going to hurt. 

The Chancellor’s October ‘21 Budget was an optimistic look beyond the pain of the last two years and leant heavily into the spending that will impact on voters’ lives, particularly around the government’s flagship ‘levelling up’ slogan. 

We have looked at some of the headlines from the budget elsewhere. In this blog I’m going to highlight my own picks from the big budget announcements that may have an important impact on SMEs across the UK. 

Angel investment

London is one of the best places to raise investment for a business, especially around sustainable technology. With perhaps an eye on how the last election saw surprising wins for his party in traditional Labour strongholds, the Chancellor has boosted fund allocations for angel investors in the regions by £150m. 

Angel investors are able to make a huge difference to the fortunes of a company both in terms of the money they are able to inject and also how their expertise and leadership affects company culture. By encouraging angel investment, the government is sending a clear signal that entrepreneurialism is a major part of their broader economic plan going forwards. At Swoop we have long held that the SME sector is the under-appreciated backbone of the economy and with this boost, it looks like the government is encouraging businesses with potential to realise it. 

Minimum wage

A raise in the minimum wage will have an overnight impact on the P&L sheet of businesses which employ a large number of staff, particularly in low-skilled and customer-facing roles. 

While we believe that businesses should always be profitable enough to pay their employees fairly, the wage bill is often one of those immovable objects that can cause problems for a business, particularly if that business has seasonal or other fluctuations in their income. 

Businesses shouldn’t make a habit of borrowing to cover the wage bill, but it’s understandable that it happens sometimes. 

An increase in the minimum wage is the kind of change that will push some businesses to have to rely on finance more often than they would ideally like to. 

In good news, a lot of that money will come straight back into the economy, so although there might be a higher figure on the wages bill, there might also be more money in the till. If there is more money circulating in your local area, think about what you are going to do to claim your share of it in terms of attracting customers.   

Fuel duty

Fuel duty has been frozen at 57.95p per litre for the 12th year in a row, but petrol prices continue to demonstrate how unaffected by domestic politics they are. 

SMEs with petrol and diesel fleets will probably meet the news with mixed views, the most optimistic of which would be: ‘at least the pain isn’t getting worse.’

The answer may be fleet electrification which, with boosted sustainability grant funds and ESG criteria for loans, could be a smart choice for businesses that have recently spent thousands of pounds and lost hundreds of work-hours sitting in the queues outside petrol stations. 

Final thoughts

SME owners should look carefully at the details of the budget when they are published as these will contain clear signals about what is coming down the line. As these become available, we will be flagging the issues we think are relevant to SMEs and publishing updates online and in our regular newsletter. 

We are delighted that the RLS scheme has been extended into 2022, as this buys some time for businesses after Christmas trading, which this year will be an indicator of how fully the economy has recovered from the COVID-19 crisis so far. 

Businesses will, however, have to think carefully about how they are going to respond to higher costs down the line and ensure that they put measures in place to be ready for change: new equipment, for example, electrified vehicles or better marketing.

Depending on your business, you may be eligible for new money being pushed to angel investors. You may find that your business is newly-qualified for R&D tax credits. And as we often say at Swoop, if you’ve been unsuccessful at securing funding in the past, check back because the landscape is changing every day with new lenders and products becoming available. 

We don’t advise you to borrow money you don’t need, but we think it is always wise to know your options in case of emergency. 

For more information and to sign up to the Swoop newsletter, visit www.swoopfunding.com.