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PRE-BUDGET REPORT: CBI calls for Govt support for small businesses

Ahead of the Pre-Budget Report, the CBI has called on the Government to improve cash flow, or risk healthy firms going under and unnecessarily prolonging the recession.

With credit markets still paralysed, and consumer and business confidence at a low following the banking crisis, the CBI has put together a 10 point action plan.

CBI director-general Richard Lambert said: “We need to keep business working to safeguard jobs and we need to act now.

“The next six months will be critical. If we are to stand a fighting chance of preventing this recession from becoming longer and more painful, we need to act now to get the credit markets working properly.

“The most effective way of supporting economic activity and keeping people in jobs would be a temporary reduction in employer National Insurance contributions.”

The view is echoed by the National Federation of Builders who would particularly like to see extra protection for SMEs.

Chief executive Julia Evans said: “The NFB wants to see greater legislative powers being introduced to end the culture of late payments by big businesses to smaller ones. Right now, the average amount owed to an SME stands at £30,000. It’s essential that they receive what they are entitled to.

“Alistair Darling must also take steps to ensure fair access to public sector contracts, be they at national or local government level, for SMEs. Too often they are frozen out by unnecessarily complex applications procedures.”

The CBI’s ten-point plan is as follows:

* Improving the flow of capital to business - UK authorities need to do all they can to help ‘unblock’ the financial markets and improve the flow of funds to businesses.

* Countering the withdrawal of trade credit insurance - The Government or Bank of England should consider as a matter of urgency whether the public sector should act as “insurer of the last resort” on temporary basis.

* Preventing questions about ‘going concern’ status from reinforcing the downturn - Steps must be taken urgently to prevent the question of ‘going concern uncertainty’ getting out of hand.

* Modest business tax cuts to ease cash flow problems - scrapping empty property relief rates, a temporary freeze on business rates and delaying proposals for business rate supplements.

* Measures to support small and medium-sized firms including - A special low rate of employer NICs for qualifying SMEs and postponing the next rise in the small companies’ rate of corporation tax by another percentage point to 22 per cent in April 2009.

* A time-limited fiscal stimulus focused on employment - Temporary reduction in employer National Insurance Contributions. For maximum impact we recommend a 1.8 percentage point cut to 11%, at an exchequer cost of £9bn. This would bring the employer rate into line with the employee rate.

* Accelerating planned public capital spending programmes - Where cost effective and practicable to do so, budgeted capital spending should be brought forward, including the “Building Schools for the Future” rebuilding/refurbishment programme and planned expenditure on social housing.

* Supporting corporate pension provision - Give companies longer to smooth the costs of making good their pension deficits.

* Improving the nation’s skills - SMEs should be given incentives to take on apprentices through targeted financial assistance, and fund the full economic costs of large firms ‘over-training’ to the benefit of their sector.

* Supporting UK exports - Offer time-limited support for both existing customers and the wider export community as companies face difficulties in accessing bank finance.