Based in London, accountancy firm Grunberg & Co says that small and medium-sized enterprises (SMEs) could find themselves new opportunities in the wake 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 after a period of stunted inflation – reaching 4.6 per cent in November 2023, down from 10.1 per cent at the start of this year.
Two notable changes in the statement were aimed at employees: The increase in the National Living Wage (NLW), and a cut to the main rate of National Insurance.
As of April 2024, the NLW will increase to £11.44 per hour, a 9.8 per cent rise, also extended to 21 and 22-year-olds for the first time.
Employees will also benefit from the announcement that the main rate of National Insurance will be reduced from 12 per cent to 10 per cent as of 6 January.
While these changes will bring higher labour costs for businesses, it could help operators to retain staff, as well as supporting workers in labour-intensive industries, says Grunberg & Co.
“The Autumn Statement aims to capitalise on the current economic environment to aid small businesses,” said Nimesh Patel, Tax Partner at Grunberg & Co. “It has rightfully announced support for working individuals over the cost of living.
“Furthermore, the £4.3 billion tax break through the freeze on business rates is particularly encouraging. This move, along with the extension of the 75 per cent discount on business rates for firms in retail, hospitality, and leisure, demonstrates a deep understanding of the pressures SMEs face.”
Considering how the Chancellor’s measures will impact businesses, Grunberg & Co says that some operators face a year of highs after a period of lows.
Grunberg & Co says that the Chancellor’s 110 measures for boosting the economy – which he termed his “Autumn Statement for growth” – could also 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 Grunberg & Co, 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, Grunberg & Co recognised the significance of support for self-employed individuals and sole traders, with the unexpected abolition of Class 2 National Insurance – and a reduced rate of Class 4 NI contributions at eight per cent, down from nine per cent.
Nimesh finished: “Following the Autumn Statement, there’s a unique opportunity for business owners.
“The Chancellor’s commitment to investment and growth opens new doors, especially for SMEs. While there are immediate challenges, they also bring a chance to strategically manage cash flow and capitalise on the long-term support measures.
“In light of the changes to the NLW, we strongly urge business owners, especially in SMEs, to budget for these changes accordingly, and to ensure that their payroll functions are ready for January’s National Insurance reduction.”
To find out more about Grunberg & Co’s full range of accounting, tax, and business advisory services, please visit www.grunberg.co.uk.
