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Replacing grants with loans could 'stifle innovation'

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The Autumn Statement was broadly welcomed by business interests in the region although the announcement on the abolition of grants in favour of loans could stifle innovation across SMEs, one professional services firm has warned.

Mark Prince, head of enterprise at KPMG in East Anglia, said: “While entrepreneurs and owner managers may be breathing a collective sigh of relief that the rumoured cuts to entrepreneurs relief did not come to fruition, there is a risk that grants being replaced by repayable loans will have the unintended consequence of stifling innovation, rather than encouraging it.

“There is a certain psychology attached to indebtedness, rather than the incentivisation attached to grant funding. So while any increase in availability of finance will always be welcomed, young fast-growing businesses don’t necessarily want to be burdened with short-term cash interest and the longer term spectre of repaying loans.

He added, “Nevertheless, the financing of much larger apprenticeship programmes through the levy on larger employers, in addition to further investment in science, should be good news for our inventors and innovators looking to create and produce new technology on our shores.”

Top priorities

Steve Elsom, area director for SME Banking in East England, Lloyds Bank Commercial Banking, said: “With infrastructure, connectivity and skills remaining top priorities for the Government, many small businesses in the East of England will welcome the announcements made in today’s spending review.

“Speaking to local business leaders, a key concern for many is the lack of skills in the market-place, particularly in manufacturing, science and technology. The Government’s renewed commitment to apprenticeships is a positive step to help address this problem, with the focus remaining on creating high-quality training programmes that will equip people with the vital skills needed for the workplace.

“The Government’s investment in housebuilding and transport will also help small companies across the region, creating a range of new supply chain opportunities for businesses, whilst increasing connectivity.

“It was good to hear that small firms are still top of the Government’s agenda, and the creation and expansion of 26 enterprise zones, including zones in Ipswich, Luton and Cambridgeshire, and the extension of the small business rate relief scheme will be welcomed by many. We are committed to supporting firms’ ambitions, and have pledged to increase our net lending to small businesses by £1 billion every year until 2017 as part of our SME Charter.”

Positive impact

John Dugmore, CEO of Suffolk Chamber said:

On the apprenticeship levy: “The priority must be delivering high quality apprenticeships, viewed positively by employers such as the Suffolk 500 in 100 apprenticeship programme. It is important that the delivery of the levy doesn’t undermine other types of vocational training and together with Suffolk County Council and out partner TCHC we will be ensuring Government continues to be fully aware of the work underway here in the county and the real positive impact it is having.”

On investment in infrastructure:  “Our transport and digital infrastructure has been in dire need of repair for quite some time which is why Chamber led campaigns such as ‘No More A14 Delays in Suffolk’ and A1307 dualling continue to be so important. Fixing our broken roads and railways and ensuring a world-class digital broadband network is a no brainer if the government wants to support growth and boost productivity. The 50% increase in capital expenditure for transport is good news, but we sorely need the government to crack on and get building.

New tax administration target to reduce the costs to business:  “The cost of complying with the UK’s complex tax system has become a major burden over recent years and so businesses across Suffolk will view positively the new target for cutting the cost of tax administration. The new target will rightly increase the scrutiny on HMRC, but by reducing the number and frequency of changes to the tax system the government can also play a major role in reducing tax administration.”

On supporting exporters: “We await more details on the government’s future plans for investing in export support. Businesses need in-market support to enable them to break into new markets. Suffolk Chambers is increasingly well placed to provide the help needed for those companies, especially SMEs who wish to trade the world with confidence given our links with Chambers of Commerce in overseas markets.”

On business rates:  “Extending the small business rate relief scheme will support businesses across the county while the broader shape of a reformed business rates system is determined. We will continue to work with local MPs and the government to ensure that business concerns over our broken rates system are met.

Last Updated ( Thursday, 26 November 2015 09:49 )