Tax concerns prompt businesses to pause investment, survey finds
Worries over possible tax adjustments in the upcoming Budget has contributed to a slowdown in commercial borrowing activity, according to the latest SME Pulse survey conducted by Atom bank.
The quarterly survey, which gathers insights from commercial mortgage brokers across the UK, found that uncertainty surrounding the Chancellor’s upcoming Budget on Nov. 26 has led many businesses to reconsider the timing of their investments.
A significant majority of brokers (92%) indicated that their clients are worried about potential changes to property tax or Capital Gains Tax, with more than half (53%) describing their clients as “very concerned”. Similar anxieties were noted regarding possible adjustments to business rates, with 54% of brokers saying clients were “slightly concerned” and 32% reporting clients as “very concerned”.
As a result, 41% of brokers said their clients are postponing investment decisions until there is greater clarity on the tax landscape following the Autumn Budget.
Demand for external finance among business borrowers has also softened. Half of the brokers surveyed observed no change in appetite for borrowing, a four percentage point increase from the previous quarter. Meanwhile, the proportion of brokers noting increased demand fell by five percentage points to 41%.
Despite this, most brokers (92%) believe that a reduction in tax or business rates in the Budget would stimulate demand for borrowing. Nearly half (48%) of respondents said their clients would be likely to invest in new premises, while 29% indicated clients might expand their workforce if costs were reduced.
“Demand from business borrowers seems to have plateaued, with exactly half of the brokers polled for the SME Pulse reporting no change in appetite,” said Tom Renwick (pictured right), head of business lending at Atom bank. “And the reason seems pretty clear - this month’s Budget.
“Given the uncertainty about potential changes to the tax system, some business owners are understandably opting to pause their plans until they have a clearer picture of their future costs. Tax represents a significant outlay for SMEs, so it’s little wonder brokers are seeing so much concern among their clients about the likelihood of larger bills.
“What will be key for businesses as they pursue their next steps is access to easy, fast and flexible finance. Brokers clearly believe that in the event of new business incentives, their clients will want to act. Lenders need to be ready to support those borrowers once the dust settles post-Budget, while brokers will need to prioritise working with lenders best placed to support their SME clients.”
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