Before the General Election, business leaders agreed that a hung parliament would be the most damaging outcome. Now that the worst has happened, what does this really mean for the future dealings of SMEs?

Thankfully, an agreement between the Conservatives and the Liberal Democrats was made within a few days of the vote counts. While the doom-mongers may still be shaking their heads saying ‘it’ll never work’, there has been a general feeling that the coalition is trying to put aside its party political differences and concentrate on the country’s economic recovery.

Businesses want to see a stable government that has the authority to take tough decisions – and this coalition certainly seem to have the potential, since it has the necessary votes and the mandate. Some might be unsettled by the influence of the Liberal Democrats, since their policies tend not to be so favourable to businesses, but it would in fact seem that many of the unpopular ones have been either dropped or watered down, and even some of the more controversial Tory policies have been tempered.

While not every policy will be good news for businesses – for example, the widely-expected rise in VAT – what is reassuring is the agreement reached between the two parties on a number of business-relevant policy areas, for example:

  • early action on the deficit, preserving the UK’s credit rating and keeping interest rates low
  • a long-term plan to reduce the headline rate of corporation tax, possibly from 28% to 25%
  • exemptions from capital gains tax for entrepreneurial business activities, helping limit the damage that could be done by raising capital gains tax levels
  • the retention of the FSA, which will avoid the upheaval that would have been caused by transferring its powers to the Bank of England
  • a ‘one in, one out’ rule for business regulations, ensuring the red tape burden does not increase
  • the creation of a major loan guarantee scheme for SME lending, to replace the EFG which has not been as beneficial as intended owing to EU rules
  • government tenders to be published online for free, with 25% of these being awarded to SMEs
  • a review of the small business tax system, including the confusing IR35 legislation

Of course, what actually comes next is critical – we need these policies to be transformed into workable and concrete proposals. The emergency budget, scheduled to take place on 22nd June, will show just how this new coalition plans to support business through the recovery period. We at CBHC wait with bated breath!