Government messages on investment & growth, MTD and net zero are not reaching outside of London, adding to the SME north-south divide
The latest edition of the SME Tracker captures the feedback of 8,900 UK SME clients through their accountants, revealing what’s impacting SMEs over April 2022.
Analysis reveals a north-south divide for SMEs regarding their compliance with and awareness of a key government scheme – Making Tax Digital (MTD). Half of advisors in London say SMEs will be ready to comply with the MTD scheme, compared with just 17% outside of London. MTD aims to remove paper-based tax filing, and presently involves online submission of VAT. In the future, it will cover Corporation Tax and Income Tax too.
Across the UK, SMEs also remain unaware about the government’s flagship Help to Grow scheme, which aims to increase SMEs’ productivity. 42% of accountants say their SME clients have not enquired about it or do not know what it is. A further 43% of accountants say that less than 10% of their clients have mentioned the scheme at all. The north-south divide exists here too with SMEs in London more likely to be aware of the scheme with 16% of accountants reporting that over half of their client base was enquiring about it, compared to just 3% of accountants outside of London.
Accountants’ feedback says that SMEs are mostly asking them for help with routine business-related issues such as tax compliance, access to finance and chasing late payments – rather than guidance about investing in their future growth and preparing for important government developments such as MTD, eligibility for R&D support, and improving ESG impact. Startlingly, just 10% are actively looking to improve financial resilience to grow their teams.
Lloyd Powell, Head of ACCA Cymru/Wales, said: “Government strategies to spur investment for the future are not cutting through with SMEs who seem to be taking a short-term approach, coupled with a belief that schemes are not applicable or relevant to them. SMEs outside of London also need a comms boost to ensure they’re part of the levelling up agenda – the government can do this by working with intermediaries and the UK’s local authority infrastructure.”
Kirsty McGregor, founder of The Corporate Finance Network, adds: “It’s concerning that government interventions to aid efficiencies or growth are not landing as they should with SMEs, especially outside of London. While accountants, professional bodies and networks are offering advice, what’s also needed is a co-ordinated and targeted government communications programme for SMEs to keep them appraised on what’s available and the reasons they should be accessing these schemes.”