January 2009

The Department for Business, Enterprise & Regulatory Reform (BERR) ‘Action for Business’ programme is focused on helping UK business overcome current financial and economic challenges so it is stronger when the upturn does arrive.

It is exploring innovative solutions to the problems and issues faced by businesses, while building on existing BERR policy initiatives. Last year’s Pre Budget Report (PBR) provided a further boost to the Action for Business programme with its strong small business focus. BERR has already taken decisive action for small businesses, such as:

Small business finance package
This is a package of targeted, temporary measures that will help small businesses struggling with short term working capital and trade and investment finance.

They include:
 

• A Small Business Finance Scheme offering up to £1 billion of bank lending, guaranteed by the Government – this is additional help on top of the existing Small Firms Loan Guarantee Scheme (see www.berr.gov.uk to find out more)
• A £1 billion guarantee facility to support bank lending to small exporters from the Export Credit Guarantee Department
• A £50 million fund to convert businesses’ debt into equity
• A £25 million regional loan transition fund to help businesses over the next six months based on a recently launched West Midlands initiative.
   
  

This support will sit under the newly-launched ‘Solutions for Business’, which offers a range of 30 business support products to promote the creation and growth of companies. All Solutions for Business products are available through the single, high profile and easily-accessible Business Link website (www.businesslink.gov.uk).

Action for business support now worth up to £7 billion
The new package comes on top of the previously negotiated £4 billion deal with the European Investment Bank to provide funds to UK banks for lending to small businesses – UK banks have now negotiated credit lines of around £1 billion.

This builds on BERR’s Enterprise Strategy published at Budget 2008 and more recent announcements to help small businesses, such as the 10 day target for Government payments and cash flow management guides published by the Institute of Credit Management (www.icm.org.uk).

Further help for business from the pre budget report
 

• The new HMRC Business Payment Support Service will enable businesses in temporary financial difficulty to pay their tax and National Insurance bills on a timetable they can afford, with no penalties or surcharges on agreed deferred tax payments. Interest will be charged at non punitive rates (www.businesslink.gov.uk)

• Overcoming barriers to public sector contracts – a new web portal for public sector opportunities over £20,000 is being planned to provide a better deal for small business contractors and simpler systems, as recommended by the Glover Report

• There are now more generous carry back tax relief for trading losses for businesses now making losses. Up to £50,000 of losses can be carried back for up to three years from the current one year

• The increase in the small companies’ rate of corporation tax (currently 21 percent) is deferred to April 2010

• Planned changes to income shifting (where income can be shifted to another person, usually a spouse, which is then taxed at a lower rate) is deferred and will be kept under review

• Empty property relief for one year from April 2009 for properties with a rateable value of £15,000 or less is to be reinstated

• Vehicle Excise Duty increases are capped at £5 for 2009 and £30 for 2010.
   

Other activity happening around the pre budget report
 

• Extra resources worth £535 million to help create a low carbon economy in Britain will be made available. The Renewables Obligation, which means licensed electricity suppliers must source some of the electricity they supply from renewable sources, has been increased by ten years to 2037. £50 million has been made available under the Warm Front scheme for insulation and more efficient heating systems (www.berr.org.uk)

• The Killian-Pretty Review of the planning applications process made a series of recommendations to simplify the planning process as a whole. This includes removing 40 percent of small commercial planning applications from the planning process altogether; reducing the amount of consultation needed and measuring customer satisfaction of local authority planning services (www.planningportal.gov.uk)

• The Sub-National Review will create a new single plan for regional development, with local authorities working together to foster economic growth. Local authorities will have to carry out an economic assessment of their area, create statutory sub-regional authorities for economic development and produce a single regional strategy (www.berr.gov.uk).

Next steps on action for business

Looking to the longer term, a joint BERR/HMT report: The UK economy addressing long term strategic challenges sets out how the UK will respond to the future challenges and opportunities of globalisation, and technological, environmental and demographic change.

As well as supporting businesses as they face significant pressures in present conditions, the Government is committed to look at all the ways it can help business to prepare for the recovery when it comes.

As the PBR results show, the Government has already taken decisive action to help business through the current difficult times. The Department for Business will continue to play a full part in supporting business.

Bank lending

Cash is vital to business. That is why BERR has been working with the small business bodies and the banks to help ensure that bank lending remains available. In addition over the next three years small businesses should be able to benefit from around £4 billion of lending via British banks from the European Investment Bank.

The Small Firms’ Loan Guarantee is increasing the amount of lending available by £60million to a total of £360 million for the financial year (2008/9). The scheme is now also available to businesses planning to expand which are more than five years old (which it was not before).

An additional £30 million is also being made available to produce more Mezzanine finance. Normally businesses either borrow money (debt finance) or give a part of the business to an investor in return for investment (equity finance). Mezzanine finance is a combination of the two.

Business Link – the Government’s business advice and support service – is now offering free personalised, confidential, business ‘Health checks’ on how to maximise cash flow, as well as improving marketing and business planning. This is in addition to its full range of services - which last year helped around 856 thousand customers (www.businesslink.gov.uk).

Other help

Business has said that it has found it difficult to find the help on offer. The new “Solutions for Business – funded by Government” package launched by Peter Mandelson on 23rd October 2008 will reduce over 3000 different schemes into 30, all accessible via Business Link (www.businesslink.gov.uk). This process – to be completed by March 2009 - will make it much easier for businesses to find the help they want.

BERR is also working to develop a strategy to help businesses take full advantage of the opportunities created by the move to a low carbon economy.

The reform of company law has already generated significant cost savings of over £250 million. That includes some further changes which came into force on 1st October 2008 which simplify some technical processes and saves private businesses £70 million of costs a year.

The Regional Development Agencies (RDAs) (www.englandsrdas.com) are on the front line in helping business adapt to the downturn. Over the summer they radically re-prioritised their budgets and programmes and each has published a document - with the Department for Business and HM Treasury - setting out what help they will provide to business in the current climate. This ranges from small loans to help businesses struggling with cash flow, through to continued investment in major projects to give certainty to business and prepare the ground for the recovery.

New Department for Business measures to simplify workplace dispute resolution and save business more than £175 million a year have completed their final stages in Parliament. The changes will lighten the load on business by encouraging earlier, more informal resolution of workplace disputes. The new system, set to come into force in April this year, will give employers greater flexibility to develop systems which better suit their workplace. ACAS (www.acas.org.uk) is developing a statutory code of practice to set out guidelines for employers and will be able to step in and mediate disputes at an earlier stage.