Enterprise Nation and The Entrepreneurs Network call on government to address rising cost of doing business

Enterprise Nation has joined forces with think tank The Entrepreneurs Network to call on chancellor Rishi Sunak to use the Spring Statement on 23 March to tackle the rising cost of doing business or risk damaging the UK's appetite to start-up.

With the Bank of England forecasting inflation rising to 7% and a crippling 50% increase in energy costs, we urge Rishi Sunak to act decisively next week to protect small business communities from eyewatering inflationary pressures.

Small firms are not only contending with skyrocketing costs, they are also facing the end of financial support schemes put in place to soften the impact of the pandemic.

We have produced a fresh report ahead of the Spring Statement which details the deluge of costs small firms are dealing with. They include wage demands in response to inflation and worker shortages; supply chain disruption which continues to drive up costs, and the business rates reliefs that helped businesses weather the impact of the pandemic are being withdrawn.

Some businesses, such as those in the hospitality sector will also see temporary VAT reductions to 12.5% expire and go back up to 20%. These same firms will also have to contend with a 1.25% rise in Employers’ National Insurance Contributions, a move confirmed by the Treasury at the weekend.

Supporting small businesses in the Spring Statement

We are urging the government to introduce a range of policies to avoid stifling small business growth:

1. Allow micro businesses with less than five employees to use the new Help to Grow schemes.

2. Rule out a new online sales tax on SMEs.

3. Reinstate and expand the New Enterprise Allowance to £100 per week for up to a year, allow recipients to access more of it upfront, and expand the eligibility of the scheme to all 23-year-olds earning less than the National Living Wage.

4. Help entrepreneurs to scale and innovate by scrapping the sunset clause for Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs) and simplify the process for Advanced Assurance.

5. Support the opening up of data to make it easier for small businesses to learn about the wide array of support schemes available.

In his Mais lecture, chancellor Rishi Sunak outlined a vision of a "future economy built on a new culture of enterprise", but that strategy must include small and micro businesses and the self-employed, or risk reducing the UK’s entrepreneurial appetite.

A growing seed funding gap and dramatically reduced numbers of self-employed are evidence that the now healthy start-up pipeline could be impacted without swift intervention.

Emma Jones, founder and CEO of Enterprise Nation, said:

“We totally support the chancellor’s vision to create a new culture of enterprise. The UK’s appetite to start a business is at record levels, and the reality is, it isn’t just the next Google or Meta the government should pay attention to.

“Our research shows that the UK’s enterprise culture is contending with spiralling and pinching costs, new tax burdens and reduced financial support. Small firms are still excluded from the very schemes put in place by government to support growth. If we were to add in an online sales tax it could tip some firms over the edge and could have a serious effect on the UK’s future economy.

“We urge the chancellor to consider these recommendations in his Spring Statement.”

Sam Dumitriu, research director at The Entrepreneurs Network, said:

“The chancellor recently set out his vision for "a future economy built on a new culture of enterprise". To make it a reality will require policies that halt the decline in self-employment, that fill the emerging seed-stage funding gap, and support small businesses at a time of sharply rising energy costs.

“The chancellor needs to support businesses to realise their growth ambitions. Instead of hitting SMEs with new taxes, he should be fixing and expanding schemes such as Help to Grow and tax reliefs like SEIS.”

You can read the full report here.

Karen Watkins, Enterprise Nation member and founder of HR and organisational design firm Rowan HR, thinks rising prices means small firms are shouldering higher costs without benefiting from support programmes such as Help to Grow.

“Time is money, and the compliance and regulations that surround running a business place a huge constraint and burden on micro businesses.

“We are expected to comply with the same level of regulations that bigger businesses do but on a fraction of the budget, we pay the same financial obligations, yet we are regularly excluded from schemes that could mean the difference between surviving or thriving.”

Matthew Walker, Enterprise Nation member and co-founder of Savora Drinks, has always kept a keen eye on different methods of raising finance. Savora has benefitted from two rounds of SEIS investment, as well as grant funding such as through the government’s Kickstart Scheme and Innovate UK’s Young Innovators Programme.

“SEIS is a great way for SMEs to raise investment and there are plenty of investors out there looking to invest through the SEIS and EIS schemes. However, there is often a mismatch.

“Unless you have personal connections within your network who are looking to invest, it is difficult to find the investors - and equally difficult for the investors to find the SMEs to invest in.”