New Government Support for SMEs From April 2024

New Government Support for SMEs From April 2024

Following the Prime Minister’s economic speech in March, the UK government released a press statement confirming a new reform package that will offer new support for small businesses and SMEs from April 2024.

One of the biggest changes announced is new government funding for apprenticeships. It aims to bring more young people into the workforce and eliminate the financial burden of apprenticeships for small businesses. Other changes coming into force are simplified reporting requirements and a new initiative targeted at encouraging more women-led businesses.

In this blog, one of the UK’s leading company formation agents, Rapid Formations, explains everything small employers need to know about these new changes and support plans.

New Apprenticeship Funding Available

From 1 April 2024, small businesses and SMEs will receive £60 million of new funding to help them take on apprentices, the press statement affirms. The government will cover the full cost of training an apprentice up to the age of 21, providing significant financial relief for small business owners and giving more young people opportunities to enter the workforce.

On top of this, Sunak promises to inject an additional £60 million into the cause next year. Together with this year’s investment, this “guarantees” to be sufficient enough to cover the existing demand for apprenticeships.

The press statement also states that from April, large organisations (those paying the apprenticeship levy) can transfer up to 50% of their unused levy funds to other companies to help them take on apprentices – up from the previous limit of 25%.

The way levy funds have worked thus far is on a ‘use it or lose it’ basis, giving employers up to two years to utilise their allowance. Any leftover funds would be returned to the Treasury. According to City & Guilds data, a mere 4% of employers had used up their allowance between 2018 and 2023, leaving millions of pounds wasted, essentially.

To make matters worse, the previously underfunded apprenticeship system caused a staggering fall of nearly 50% in the number of apprentices starting in small businesses between 2017 and 2021, a CIPD report shows. The pandemic, cost-of-living crisis, and a recession certainly didn’t help. Many believe a change has been overdue.

With that in mind, surplus funds are now being put to better use by being transferred to other companies. This system aims to help SMEs hire more apprentices and remove the cost of doing so.

The press statement says that employers have already pledged to transfer over £35 million to businesses of all sizes. Collectively, these new measures strive to get up to 20,000 more apprentices into work and increase apprenticeship funding to over £2.7 billion from 2025.

What This Means for Small Businesses?

A major problem that it addresses is the persistent labour and skills shortages among micro and small businesses, one of the biggest growth blockers caused by a lack of access to funding. However, This new government investment gives SMEs greater access to valuable, skilled, and ambitious apprentices and removes the financial implications of training them.

Changes to the levy transfer are also incredibly positive for SMEs. Not only does it unlock additional funding on top of the government’s £60 million, but it also responds to the loud and clear voice of employers, most of whom have been pushing for a reallocation of levy funds, according to the City & Guilds report cited earlier.

The government’s response to this campaign is, therefore, a step in the right direction that will be welcomed by small businesses.

Simplified Reporting Requirements

Though this is yet unconfirmed, Sunak is expected to announce simplified reporting requirements for SMEs, potentially saving them millions of pounds and hours per year. This will first be tackled by increasing the company size threshold by 50%, meaning that more companies will qualify as small or medium-sized businesses.

Existing thresholds were set by the EU. However, due to Brexit, the UK can adjust them to suit the needs of its businesses. As a result, over 130,000 organisations could benefit from having fewer arduous forms to fill out and non-financial reports to submit.

The government also plans to modernise reporting systems for businesses. Firstly, by making it easier to share digital annual reports, and secondly, by abolishing certain duplicate and bureaucratic EU reporting requirements. Consequently, this will alter what companies have to include in their annual reports.

All of these changes are expected to save around £150 million and upwards of 1 million hours per year for SMEs. These new rules would significantly free up small business owners and increase their budgets. Long, arduous form-filling will be no more, giving them more time and money to dedicate to driving their companies forward.

Further changes are anticipated to come into effect later this year. For instance, we could see the number of employees constituting an SME rise from 250 to 500, adding around 1,000 more SMEs to the UK’s business landscape. Also, medium-sized companies could be exempt from submitting strategic reports, saving them a further £148 million a year.

Women-Led High-growth Enterprise Taskforce

The final part of the reform package is an update to the Women-led high-growth enterprise taskforce, a government-backed project aiming to boost investment and diversity in female-led businesses.

Data from Startups reveals that male entrepreneurs received seven times more funding than their female counterparts in 2022. In 2023, that gap reduced ever so slightly to 6.2. To put that into perspective, men receive an average of £4.7 million while women get a mere £763, 300. Fewer women also ask for funding, and when they do, they receive less than male founders.

Not only is there a shocking imbalance in investment already, but the gap widens even further for businesses with a male co-founder on board. In 2023, these small organisations received an average funding of £6.2 million.

Clearly, a significant imbalance remains – not just regarding funding but also diversity and inclusion – all of which the taskforce is set to diminish. In its 2024 report, the taskforce presents the following aims:

• Raise private capital for female-founded businesses
• Improve the diversity in women-led businesses with at least one woman holding a top position in the organisation
• Enforce a fair proportion of founder-to-employee equity share, giving women more ownership, control, and decision-making power within the company as well as equal rights to exit payouts. To avoid dilution over time, the task force recommends that women hold more than 25% of equity.
• Request that investment companies disclose their percentage of senior investment professionals as female partners are more likely to invest in female-founded businesses than men
• Increase the number of investment companies signing up to the Investing in Women Code, where participants are more likely to provide financial support to female founders
• Drive inclusion in the investment ecosystem through regulation, monitoring, and action by investors
• Introduce Female Founder Growth Boards across England to tackle regional imbalance of female-led high-growth enterprises
• Inspire more women and girls to become entrepreneurs

These are just some of the key changes expected to come into play by the taskforce. As a result, the government hopes to provide female entrepreneurs with greater access to crucial funding, remove the high barriers they face compared to male business owners, and give all SMEs a fair chance to scale up and strengthen the UK economy.

Summary

There are plenty of positive initiatives for small businesses and SMEs to get excited about this month. As well as crucial apprenticeship funding that will help younger people find jobs, new reporting measures will significantly cut costs and time spent on arduous administrative work. Also, an intensified focus on supporting female entrepreneurs will help make the country a fairer place for women-led organisations to thrive.

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