The Lead Taker: Are we there yet?

Are we there yet?

The chant is most frequently heard from the back of a car full of children, but these days I can hear the same question being echoed by the back-seat drivers of the UK economy, by which I mean small businesses.

In both cases, I recommend a game of "I Spy" and that's what we are going to play now - "I Spy the end of the recession" - as this month's Lead Taker journeys through the UK's economic landscape, from the broker's perspective.

I will start with the glimmers of hope that are illuminating the end of the tunnel.

Off we go then, "I Spy something beginning with B" - the Budget would appear to have been welcomed by business, largely on account of the reduction in corporation tax to 24 per cent from April, and further cuts planned for 2013 and 2014.

By then, the rate will be down to 22 per cent and within sight of a 20 per cent rate of business tax that would align basic rate income tax and the small companies' rate.

However, budget action on fuel duty fell short of expectations for firms struggling with the price of diesel.

Various rounds of quantitative easing have already pushed up the price of a barrel of oil, as sterling exchange rates took hits, and the rise in duty planned for later this year can only lead to further angst. In its March survey, the Federation of Small Businesses reported that fuel was identified by more than 60 per cent of firms as a major cost driver.

That being said, foreign investors seem to agree that it was a budget for UK PLC in terms of investment, and GlaxoSmithKline’s decision to invest over £500 million and create 1,000 new jobs here is reassuring.

Particularly so, as many of the jobs will be of the well paid “high tech” variety, given that pharmaceuticals are somewhat elaborate these days.

The news followed confirmation in the Budget that the Government intends to implement a "patent box" to encourage investment in R&D and related manufacturing in the UK, by introducing a lower rate of corporation tax on profits generated from UK-owned intellectual property.


The Chancellor also confirmed that the Green Investment Bank will be open for business by the time you read this, and reaffirmed his intention to encourage more investment in the UK's world-leading energy sector, including renewables.


Another positive "I Spy" is the National Loan Guarantee Scheme (NLGS), launched in March.

The scheme aims to help smaller businesses (annual group turnover of up to £50 million) access cheaper finance.

Banks can currently make use of £5 billion of government guarantees for their unsecured borrowing but must pass on the entire benefit of lower rates in cheaper loans.

Firms that take out an NLGS loan should therefore see a rate drop of around 1 per cent, compared with the non-NLGS variety, and the scheme will eventually extend to £20 billion in guarantees.

A thought comes to mind though, as banks retain the credit risk their usual lending and credit parameters apply, so we will have to see whether the scheme produces more unfulfilled promises than loans.

Turning my attention to the broker community, I am about to tick the "business levels on the way up" box in my "I Spy" book, although I haven't decided whether to tick in pencil or to whip out my pen.

Improvements in my own business could be down to a lag effect, although I think the CBI is right when it says that UK manufacturers’ expectations for output growth in March were at their strongest for a year.

Of the 436 manufacturers responding to its latest Industrial Trends Survey, 39 per cent believe that output will rise in the next three months, and order books in March remained well above their long-run average.

Meanwhile, the Federation of Small Businesses (FSB) reports that business confidence has improved, bouncing back from the record lows reported at the end of 2011.

Over half of the 3,000 firm's surveyed by the FSB said they are aiming to grow in the year ahead and the research shows considerable optimism about the scope for businesses’ expansion, with a third of firms looking to increase capital investment plans in the next three months.

In addition, the Federation is pressing the Government to create a Small Business Administration which would champion the needs of small businesses and provide a single focus on issues such as access to finance.

So, I am urging you to put a positive tilt on your day and continue to play "I Spy the end of the recession" as you move through your working environment.

Once you have ticked enough "I Spy" boxes you will surely lighten up, instilling confidence in your clients, and at this point you should expect to send off for your "I Spy" badge.

Unfortunately, on this occasion, you are stuck with making your own cardboard variety but it's worth the effort as once coloured in and pinned on, I can promise that you will see things in a better light.

Here's hoping this is the glimmer at the end of the tunnel!

Leave a comment