Over 800 members of the Federation of Small Businesses – the FSB – who took part in a poll have indicated an overall feeling of indifference to the recent budget.

‘The Voice of Small Business’ survey panel felt that the budget would have little effect on the day to day management of their businesses. In other words there wasn’t anything really harmful in it for businesses, but nor was there anything that would be particularly helpful for them.

The poll took place on the day following the budget – 24th March – & asked participants what impact the budget was likely to have for their businesses. Forty five percent responded by saying it would have no impact at all, with thirty one percent envisaging a beneficial effect. Of the latter group fifty four percent said they expected to get a cash flow boost from £1 to £1,000 in the coming year. Thirty nine percent of respondents felt that the Budget would be beneficial to the UK economy, while eighteen percent foresaw a negative impact.

The national chairman of the FSB - John Walker - said: “The Budget was pro-business and we are pleased that the Government has listened to some of our concerns and has extended small business rate relief and scrapped the planned 1p rise in fuel duty and the escalator. But, as the results from the poll show, the Budget has not hurt small businesses, but it won’t help them to grow either.

“While we welcome the introduction of Enterprise Zones across parts of the UK, the missing link in the Budget was measures to help all UK businesses to take on staff and grow their business. This could have been done easily through extending the National Insurance Contributions holiday to micro-businesses.”

The Federation of Small Businesses – FSB – has issued a press release detailing its response to the latest budget.

While the FSB stated that it welcomed some of the announcements made in the budget which it felt would aid stability, it expressed concern that not enough had been done to encourage job creation.

It was pleased to hear that 21 Enterprise zones are to be created across the UK since it has long been demanding their reintroduction. However it was disappointed that the government had not extended its National Insurance Contributions holiday to existing businesses – a policy it felt would have been cheaper than maintaining people on benefits. Given the high levels of unemployment – currently standing at 2.5 million – it felt that this was very much a missed opportunity.

The FSB felt that the government had taken on board the difficulties experienced by businesses throughout the UK with regard to the burden of regulation by introducing a 3 year moratorium on new domestic regs for micro firms. However it felt that to fully create an environment conducive to employing more staff this requires to be extended to all small firms.

The FSB has been campaigning strongly with regard to fuel duty & with 70% of respondents to its survey stating a car or van to be essential for day to day business operations; it was pleased to learn of the 1p immediate cut as well as the abandonment of the 1p rise that was due together with the fuel duty escalator. It also welcomed the introduction of the fuel duty stabiliser –albeit a limited form – again something it has campaigned for following a recent FSB survey showing that 62 per cent of businesses are increasing prices, one in 10 laying off staff, a quarter freezing wages and 36 per cent reducing investment due to the unpredictable nature of fuel prices.

The proposed plan for 50.000 additional apprenticeships was welcome news since 7 in 10 of current apprenticeships are with small businesses.

The extension to Small Business Rate Relief for properties with a rateable value below £6,000 was also seen as welcome news that would help small independent retailers.

The 200 per cent increase in SME Research & Development was seen as another positive move.

While the FSB was pleased to see the rate of corporation tax drop over the next 3 years, there was no mention of how the small business rate of 21% might be affected.

The Federation of Small Businesses – the FSB – is calling on the government to reverse the planned 1p rise in fuel duty & take measures to counteract the current volatility of fuel prices.

Concerned about the impact of the rise in fuel duty for small businesses, the FSB is urging the government to introduce a fuel duty stabiliser.

The mechanism - which would adjust fuel prices in order to alleviate the impact on pumps of oil price rises - is deemed by critics to be too complicated, too costly & not environmentally friendly.

Initial results from over 1000 participants in an FSB survey indicate that 79% of small business will be negatively affected by rises in fuel duty.

The FSB has expressed particular concern with regard to sectors it considers key to economic growth. The manufacturing industry – one of the few areas that has demonstrated growth – is being severely affected, along with the construction & transport industries.

According to earlier research undertaken by the FSB, the rise in fuel duty will cost small firms up to £2,000 extra over the next 6 months which is likely to result in measures such as staff being laid off, wages frozen, & prices increased.

Around 2,494.000 people are employed by the manufacturing industry which contributes £133 billion to the economy.

There is a possibility that the Budget could bring a cut in VAT on fuel & though the FSB would be in favour of this, they point out that whilst it would lower the price at the pump, it would not halt the sudden unexpected changes that are typical in the current climate – something that a fuel stabiliser could do.

The FSB have demonstrated in their report - ‘A fuel duty stabiliser – is it really that complicated?’ - that a fuel stabilizer can be a simple, cost effective, as well as an environmentally friendly solution, which would allow businesses to factor in fuel costs when forward planning.

According to the FSB, by taking no action to relieve the situation, the costs to small businesses - & by default to the growth of the economy - will far outweigh any short term costs of implementing the mechanism.

Small businesses are losing millions of pounds because of the failure by HM Revenue & Customs to deal with queries.

According to Andrew Tyrie - Conservative MP for Chichester, & chair of the Commons’ Treasury select committee – the ‘collateral damage’ that failed investigations are causing is ‘huge’. During a debate in the House of Commons on HMRC, Tyrie referred to one businessman who had losses amounting to £7m through the time & effort involved in disputing a five year case that turned out to be groundless.

“The stress involved in such an experience would have been crippling for many people,” he added. “It is not just that individual who has lost out but all those who depend on his business for their livelihood and all those who might have had jobs in it had it been able to concentrate on expansion rather than fending off HMRC.

“One case does not prove anything, but the sheer scale of complaints now pouring into MPs’ postbags suggests something.”

The debate was part of the ongoing hearing by the committee which is considering evidence on the performance of HMRC & which is expected to report shortly.

Last month the committee heard how staffing cuts at HMRC are causing hours of wasted time for small and medium sized businesses.

Chas Roy-Chowdhury, head of taxation at the ACCA, told the committee that following the merger between Inland Revenue and HM Customs and Excise in 2005 there had been a 25% reduction in staffing which was “not helpful”. With further proposed cuts of 25% there was concern about the implications, despite HMRC’s contention that there had been no reduction in quality of customer service.

Paul Aplin, chairman of the Tax Faculty Technical Committee at the ICAEW, said that staff at his firm spent much of their time dealing with simple enquiries, ‘The experience with the HMRC five or six years ago is completely different to now. To get a relatively simple thing done, like changing a tax code, would have taken a phone call. Now it can take months.’

In a similar vein the Institute of Chartered Accountants of Scotland (ICAS) recently claimed that plans to spot check s SMEs’ record-keeping could cost the taxman ten times more than it has estimated. HMRC is currently consulting on proposals to visit 50,000 SMEs a year to check the adequacy and accuracy of their business records, at an estimated cost of around £54 each half day visit to the businesses. According to ICAS this estimate is “massively understated”, citing the figure at over £560 using “realistic estimates of business disruption and adviser’s time”.

Ian Dewar, Convenor of the ICAS Small Business Tax Sub-Committee, said that contrary to “HMRC’s basic assumption” that “SMEs with poor records have chosen to have poor records” the shortcomings of businesses regarding  record keeping often result in too much tax being paid.

He added: “HMRC should be looking for positive ways of encouraging taxpayers to maintain adequate records, rather than adopting a big-stick approach that we believe will cost owner managers a lot of resource that could have been better directed towards growing their businesses.”

It is widely anticipated that George Osborne will use the upcoming budget later this month to begin tackling an escalating VAT dodge on the sale of goods including CDs, DVDs, memory cards, vitamin pills and contact lenses.

The VAT avoidance involves many high profile British retailers & is thought to have lost the government upwards of £130m last year.

The use of the current loophole has widened the gap still more between the high street stores & the giant website stores, with many smaller businesses being on the brink of being pushed out of business.

The loophole centres around the existing low value consignment relief rules  - LVCR - on VAT which were drafted 28 years ago – long before the advent of internet sales. The rules waive a requirement to pay VAT for low-cost goods imported from outside the European Union. Currently £18 constitutes the low value. Some of the larger firms have manipulated systems so as to use subsidiaries based in the Channel Islands or their agent companies in order to qualify for the relief.

Lord Sassoon – Treasury minister – speaking in the House of Lords said: “We are committed to tackling tax avoidance and, in that context; we hope to be in a position to announce possible changes to the operation of LVCR [low-value consignment relief] in the budget”. He also said that unlike the Labour government – which had been “closely reviewing” the controversial European VAT relief since 2006 – the new government had “immediately gripped the situation”. In the past Labour ministers had insisted that Channel Islands internet trade was “not a loophole”.

Campaigners against the current VAT loophole have claimed it is responsible for hundreds of smaller retailers being forced out of business, especially those selling music & DVD’s. According to figures from the Entertainment Retailers’ Association between 2005 & 2009 the number of independent stores in this field fell dramatically by more than half from 985 to 446.

In a recent letter to the campaigners Revenue & Customs said: “We have been very clear that the relief and the special VAT position of the Channel Islands were never intended to be exploited in this way to supply goods VAT-free to UK consumers. It is for this reason that we are actively reviewing the operation of the relief.”

Kantar – the consumer research firm – said figures show British shoppers spent £420m on over 45m CDs, DVDs and Blu-ray discs from online sites in the 12 weeks leading up to Christmas.

Boots Opticians, Dollond & Aitchison Tesco, Asda,& Sainsbury’s,  – as well as fast-growing internet specialists Amazon, Play.com & TheHut.com are among the retailers offering VAT free prices.

The BCC has written to the Chancellor with a revised economic forecast & its recommendations for encouraging business growth.

It expresses the need for government to instigate the innovative policies & changes that are vital to promote the growth in enterprise it purports to support.

Among its recommendations it proposes that the government discontinue or put on hold the implementation of new employment legislation which it regards as counterproductive to the recruitment required both for business recovery & job creation because of the additional burdens it places on employers.

It also asks for a removal of the bureaucracy surrounding planning laws to allow simpler, faster decisions as well as clarity regarding Local Enterprise Partnerships.

Many businesses lose out on exporting opportunities because of the lack of trade finance & the difficulty of breaking into new markets. The BCC calls on the government to support British exporters by restoring the £25m cut from trade promotion budgets, & to expand the support of The Export Credits Guarantee Department to SMEs among whom it is less well known.

The BCC also calls for more transparency from banks regarding the lending process & in terms of the support they can offer to businesses.

It points out that small business may miss out on the reduction in corporation tax & should be encouraged to invest in developing their businesses by being allowed to carry forward unused relief.

Speaking about the anticipated Budget, David Frost - Director General of the British Chambers of Commerce - said:

“The Government’s rhetoric on growth has not yet been matched with real action to deliver a strong environment for the private sector to flourish. Business is not seeking handouts but needs the Government to create the climate in which they can grow. That means less not more employment legislation, a greater focus on boosting British exports and keeping pressure on the banks to ensure that businesses can get access to finance.

“It is time for the Government to take some pro-growth steps. A ‘Budget for Growth’ will be judged by whether it boosts business confidence, encourages investment and rekindles the spirit of enterprise. If the Government provides a radical framework, business will do what it does best – creating wealth and jobs, innovating to deliver strong companies and providing the much needed growth for this country.”

After inviting comments & feedback from small businesses on the problems they’ve experienced in procuring contracts with them, the government has introduced a range of measures designed to make it easier to do so.

The Government considers small businesses vital to the growth of the economy & wants to optimize their ability to tender for billions of pounds of contracts. It is determined to ensure that they are no longer excluded by ‘excessive bureaucracy & petty regulation’.

One of the key measures announced is the introduction of a Contracts Finder website  http://contractsfinder.businesslink.gov.uk  This new online facility will mean that public sector contracting opportunities over £10,000 will be available for everyone to see & increase the transparency of the way in which the Government conducts business.

Key features in the package include:

• The appointment of a new Crown Commercial Representative (CCR) for SMEs (Small & Medium Enterprises) - Stephen Allot

• The launch of SME product surgeries to be led by the new CCR which ‘will give SMEs the opportunity to pitch innovative products and services direct to a panel of senior procurement and operational professionals from central government and the wider public sector’

• Changing the assessment process for companies who want to do business with the Government by a) attempting to eradicate the need for PQQs (Pre-Qualification Questionnaires) for contract tenders under £100,000 & b) permitting firms to submit their pre-qualification information once only for all procurements in common commodities, thereby cutting costs & saving time for both SMEs & government.

Other measures the Government intends to introduce in order to facilitate more open competition include the breaking up of large contracts into smaller parts, & encouraging an increase in sub-contracting by major suppliers. It will also be holding an open procurement competition from May 2011.

The SME feedback facility on the No 10 website  http://www.number10.gov.uk will be ongoing.

Speaking at the launch event, the Prime Minister – David Cameron – said: “Today, we are announcing big changes to the way government does business. By that, I mean what I say: literally, the way it does business. The contracts it signs, the goods and services it purchases – and the way it purchases them.

“We need to make the system much more open, more competitive and transparent.”

He also urged procurement mangers to take risks with “new, small and dynamic companies” & called upon SMEs to seize the opportunities that were being opened up to them.

Earlier this week the chancellor – George Osborne - announced a deal between the coalition government & the banks with regard to bonuses, taxation & lending – Project Merlin.

The deal has been met with strong criticism from the Labour Party, many economists & the unions, as well as members of the coalition with the Lib Dem peer Lord Oakeshott resigning as the party’s Treasury spokesman after he stated that the agreement should never have been signed. Others have been cautiously optimistic at the promise of increased lending to small businesses.

Many feel that the Merlin deal doesn’t fulfil the commitment made by the coalition government with regard to clamping down on the huge bonuses in the financial sector & to get the banks lending again. Their assurance with regard to the latter stated: “We will develop effective proposals to ensure the flow of credit to viable small and medium-sized enterprises.” Speaking about the deal on Wednesday Vince Cable said: ‘This time the banks have made a commitment to link executive pay to lending, and have volunteered an extra contribution to a business growth fund. We have negotiated a good deal for British business …’

As part of the deal, the four big banks – The Lloyds Group, RBS, HSBC & Barclays, as well as Santander have agreed to increase lending to small businesses by £10bn to £76bn and overall lending will increase from £179bn to £190bn. However this latter increased lending commitment isn’t as straightforward as it seems. The £190bn is a gross figure which allows banks to include loans that have been repaid as well as new lending, as opposed to the previous net lending targets which prohibited banks from including such loans. Oakeshott stated his view on the new method of calculating targets: “It means what they lend with one hand they can take away with the other.”

Economists have also been sceptical of the positive impact the increased £10bn will make to small businesses. Vicky Redwood, economist at Capital Economics, said: “We doubt that the commitment will stop net lending to firms from falling further. It is currently falling by about £1.5bn per month. Other things equal then, the extra £10bn of lending this year – or £1bn or so a month – won’t turn this trend around.”

There is a further issue with regard to the reluctance of many small businesses to engage with their banks. This was highlighted by the head of policy at the FSB (Federation of Small Businesses) – Andrew Cave, ‘an increased willingness to loan to the SME sector will do little to persuade the 50% of small companies refusing to approach their bank to renew their relationship with them. We’re very concerned. The recession is over now and we are hopefully moving back to growth, but the banks are still not lending and small businesses are avoiding the banks. The fear factor is key – many small companies fear that a Pandora’s box could be opened if they approach their bank; that their entire account might be reappraised and the terms of their existing loans rearranged. That’s how badly many smaller companies feel about the banks.’

Critics of the deal like Cave, stress that increased levels of lending are not in themselves enough to stimulate growth & that further initiatives are required to bolster the small business sector.