The Government today unveiled a £7 billion package aimed at helping smaller firms through the current economic downturn, including access to loans and deferring tax rises.
Amid increasingly dire warnings from business groups about the scale of the damage being caused to industry as the UK heads towards recession, the Chancellor pledged "real help" to small and medium sized firms, which employ 60 per cent of the private sector workforce.
Describing smaller firms as the "engine" of the UK economy, Alistair Darling said he wanted to help equip them for the challenges of the future, improve access to credit, ease cash flow and reduce burdens.
Firms will be allowed to spread tax payments, including VAT and national insurance "for as long as they need", MPs were told.
The Chancellor announced a £4bn deal with the European Investment Bank to provide money to UK banks to pass onto small and medium-sized enterprises (SMEs), which seven banks had already expressed an interest in.
Around £1bn will be available to their customers by the end of the year, said Mr Darling, adding that credit will also be offered through a temporary Small Business Finance Scheme, worth another £1bn.
"It should allow small businesses to borrow sums from £1,000 to £1m at more flexible terms than before, making lending more affordable and easily accessible.
"This will help SMEs experiencing short-term cash flow problems get the funding they need."
The Chancellor said a further £1bn of support will be offered to companies which export goods, through the Export Credit Guarantee Department.
From January, it will offer a temporary facility to support the availability of short-term working capital for smaller exporters.
Mr Darling announced that he had decided to defer the increase in the small companies rate of corporation tax, which firms pay on their profits, leaving their tax rate in 2009 unchanged.
He said: "This is a comprehensive package of support which business has been asking us to provide. A package to support business, worth £1bn of tax cuts, £2bn in loan guarantees, along with £4bn of European money. A £7bn package of measures, real help.
"Funding we can provide because we have decided to take action to support our economy through this recession. I believe these steps will help businesses through the current difficulties and enable them to invest so they can make the most of opportunities as the global economy recovers."
Mr Darling also took action aimed at stopping firms demolishing empty properties in a bid to avoid paying business rates, an issue highlighted by the CBI ahead of its national conference today.
He announced a temporary increase in the threshold for empty property relief, so that for the 2009/10 financial year, empty commercial properties with a rateable value below £15,000, will be exempt from business rates.
The exemption covers an estimated 70 per cent of all empty properties.
A new dedicated Business Payment Support Service was launched, giving businesses a "fast and streamlined" service for arranging to pay their HM Revenue & Customs (HMRC) tax bill to a timetable they can afford.
Financial Secretary to the Treasury Stephen Timms said: "The Government is determined to support businesses through these challenging economic times. The new dedicated Business Payment Support Service will ensure that businesses needing extra time to pay their tax bill can get a quick decision from HMRC.
"By speaking directly to an HMRC adviser they should be able to agree an affordable payment timetable without incurring any extra charges, saving hard working businesses both time and money."
Lesley Strathie, HMRC chief executive, added: "We are committed to supporting businesses experiencing temporary difficulties and understand that some businesses want to talk to us about the amount of time they need to pay their HMRC taxes.
"Our new Business Payment Support Service will make this easier and faster. Callers will get through to an HMRC officer who will listen and provide a solution tailored to specific circumstances.
"Business people who find that they need more time to pay will receive a sympathetic response."Reuse content