82% of SMEs feel that the Chancellor’s VAT rate cut was not a good idea, according to a survey released. The findings of the survey, conducted by mid-market business software house Access Accounting, will make difficult reading for the government as it looks at ways to stimulate the suffering economy.
The Chancellor’s 2.5% VAT rate cut has been in effect for almost three months, yet 51% of businesses say that the change is not doing enough to stimulate the economy. 27% believe that it was a good start, but that the Chancellor needs to do more. Overwhelmingly, 98% feel that the rate change will not result in any material increase to their business.
When asked what other steps the Chancellor could take to help SMEs, 21% of respondents suggested that the Chancellor should force banks to pass on rate changes to business overdrafts and loans. 19% want to see a decrease in corporation tax rates and 16% want increases in tax allowances for small and medium businesses. 16% also want to see a reduced legislative burden on employers, while 13% want better protection for small and medium businesses from bad debt situations.
“The Chancellor needs to start listening to UK businesses,” says Kevin Misselbrook, customer services director of Access Accounting. “Cutting the rate of VAT has clearly done nothing to stimulate business or the economy. The results of this survey show that more could be done to help boost the economy without putting greater time and cost pressures on small businesses.”
When asked about the cost of implementing the VAT change, 53% of businesses estimated that it cost less than 100. However the time-costs associated with the change varied; 42% had to spend half a day to make the changes, 25% required less than a day, 15% used 1-2 days, 12% are still addressing the issue to date and 6% took more than 2 days. With 4.7 million businesses in the UK, (according to the Department for Business Enterprise & Regulatory Reform), the base cost to implement the changes, even at a cost of less than 100, cost UK businesses approximately 470 million.
When asked how long it will take for the economy to recover, the largest group of respondents (47%) predicted twelve to eighteen months, 24% said eighteen to twenty-four months and 19% felt it would be twenty-four to thirty months or thirty months or more. Just 11% believe the recovery will begin this year.
Generally, 52% of respondents are uncertain about the economy. 25% report they are not confident and 15% are very unconfident about the economy; only 8% believe that they are confident at the moment.
D.C.