The UK is enduring tough times with Brexit looming. As it happens, SMEs make good use of the common market; free movement of labour and capital can help increase their efficiency. This is the biggest threat of Brexit: SMEs moving abroad. SMEs make up 99% of the UK business numbers and around 60% of total employment - thus, they're perhaps the most important part of the UK economy. They are the driving force of productive output and provide significant employment to UK citizens.
Brexit however is only one threat to small businesses - and is external. It cannot be controlled. The actual number one threat to small businesses is cash flow, as this is the biggest cause of SME startup failures. Brexit is only going to make this worse. Tariffs and a weakening pound is going to make imports cost more (such as raw materials).
UK grants
Grants are a huge financial support net for the SME sector as a whole. There are hundreds of UK small business grants out there, although a small handful lead in popularity. Apprenticeship grants are one of the most common, as they cover (in some cases) 100% of the funding for 16 to 18 years olds who meet the apprenticeship criteria. This is a good example in which the taxpayers money can support a small company by helping reduce the costs of employment. Young workers offer productive value, which should be able to boost revenues (or reduce the need for other workers), whilst also setting them up for a future relationship with the company.
The Enterprise Investment Scheme (EIS) is particularly useful for startups who are scaling quickly and are in their later stages. Approved businesses get their investors a significant amount of funding in tax benefits. 30% can be claimed back in tax on investments for investors, which is capped at £1 million per investor, per year).
US and Australian grants
The UK is not quite on par compared to Australia's financing grants. Australian grants work in a similar way to the UK grants, but there is arguably even more funding available (relative to the size of the economy/amount of businesses). As a result, Australia are even more dependent on small businesses to drive the economy; or rather, they are using the potential of SMEs to their full potential.
Some worthy of a mention is the R&D Tax Incentive, which is a 43.5% refundable tax offset, given when undergoing eligible research & development initiatives of at least $20,000; Certain Inputs to Manufacture (CIM), which allows certain raw materials necessary in the manufacturing process to be imported for free (either chemical, plastic and paper goods or metal materials and materials used for food packaging); Australian Government Entrepreneurs Program, which is a business scheme that encourages competitiveness and accelerates new ideas to the commercial world. This last scheme matches funding up to $1 million for products or services that are deemed eligible. This is a significant amount of money for a small business, and can really make a difference in getting new inventions to market.
USA grants
In the states, things are run a little differently. There are some grants around, but generally the SBA (Small Business Administration) has a stranglehold on these things. SBA offers some grants such as the Small Business Innovation Research Program and the Small Business Technology Transfer Program, but generally, they are more for giving small business loans, which are paid back to the federal government. Funding tends to be more significant though, as up to $5 million can be secured for working capital, expansion and investment in equipment for the 7(a) loan program.
There are some others, including the 504 ($5 million loan for land, machinery or facilities), microloans ($50,000 loans) and SBA disaster loans (up to $2 million in loans for small businesses that are affected by natural disasters).
Should the UK increase its generosity?
The UK started off appearing as pretty generous: they have a high number of different grants, for which not a penny needs to be paid back. Whilst this is great, the reality is that they're not exactly offering as significant amount as Australia and America. Loans are not bad for a company, though. In fact, loans paid back in a timely manner can increase the creditworthiness and thus the value of a company. If the choice was between large loans with a non-aggressive repayment structure, or small grants, the former would have to be more useful.
The UK is really missing a trick here. With many businesses fleeing the UK with the possibility of Brexit still looming, the UK ought to look at increasing their small business grants and loans to encourage them to stay. And not just stay - but to prosper and help dig the economy out of the hole that has been dug by their own public and government.
Compared to Australia's financing grants in particular, the UK is falling short. Australia are well aware of the importance of SME in their economy, which is why they are doing so much to promote and harbour a prosperous environment. Despite a ton of businesses being attracted to Australia, it's highly likely that the grants are not being taken full advantage of. In fact, small businesses are struggling because of the economic downturn - it's clear that there needs to be more promotion around the hundreds of Australian grants that are on offer for SMEs. In particularly those who are in the early stages of their company, the Entrepreneurs' Programme is a very small-but-accessible grant that could be the difference for R&D projects to be successful or not.
