SMEs losing confidence in government policy

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Mark Pawlak for Adfero

Small and medium-sized enterprises (SMEs) in the UK are increasingly losing faith in the government, a new survey has found.

According to Smith & Williamson, just 49 per cent of SMEs believe current government policy is supportive of private enterprise.

This is 20 per cent down on the figure recorded six months earlier, and the third quarter in succession in which confidence in government policy has declined.

Nevertheless, SMEs remain largely confident about the UK's economic outlook. Fifty per cent of respondents said they believe the economy will pick up over the coming year, compared to just 45 per cent in the previous quarter.

This translated into strong confidence about the prospects for their own business, as 76 per cent expressed optimism about the next 12 months.

Commenting on the findings, head of entrepreneurial services at Smith & Williamson Guy Rigby said: "Our survey responses show a plateauing of the extreme emotions following the June referendum. 

"There was an initial panic following the Brexit decision and a huge relief rally when the world carried on turning.

"However, our respondents, perhaps buoyed by encouraging economic statistics and recent stock market highs, are now looking ahead to 2017 with a cautiously optimistic view."

Nevertheless, Mr Rigby stressed that the "apparent lack of government understanding" of issues that affect SMEs is a particular concern.

Indeed, he said that for most SMEs, the macro environment "remains worlds apart from their day-to-day business challenges".

For instance, he stated that many firms are worried about upcoming changes such as business rate reforms, the apprenticeship levy, the national living wage, auto-enrolment and changes to the way dividends are taxed.

Mr Rigby insisted that SMEs do not regard all these as bad things. However, he said the flow of new initiatives has been "relentless" and had an "adverse financial or emotional impact" on SME owners.

"Like buses, they’ve all come at once," he observed.

Mr Rigby singled out the government's intention to introduce quarterly tax reporting in the near future as another imminent change that will affect small businesses.

"We strongly recommend that this is delayed, to give businesses and their advisers time to make necessary changes," he said.

"The introduction of a system that cannot be complied with easily will only add further anxiety and expense to the owners of our smaller businesses."

Interestingly, one noticeable bright point in the survey findings is a growing desire among SMEs to borrow funds.

Figure showed that the perception of access to finance has improved in recent months, leading to a greater appetite for borrowing.

"Our responses indicate that many businesses are borrowing to invest in internal infrastructure, such as their IT systems and capabilities," Mr Rigby said.

"Many believe that the creation of solid foundations will leave them better able to face any negative headwinds, increasing resilience, efficiency and growth."

Mr Rigby added that many SMEs hold the view that failing to invest in infrastructure and growth could be just as damaging to their firm as "any negative external factors".