London’s business community has given the Chancellor’s Mansion House speech a warm reception on paper and a stark warning in the small print: almost half of the capital’s firms believe the Government’s current approach will make economic growth worse, not better.
Rachel Reeves used her third Mansion House address on Tuesday evening to unveil a package aimed squarely at smaller firms, including a new UK Export Finance guarantee scheme to help small businesses start exporting and an expansion of the British Business Bank’s Growth Guarantee Scheme, more than doubling the SME lending it supports to £3.5 billion a year and increasing the number of businesses helped from 8,000 to 20,000. Lloyds, NatWest and Allica Bank have each committed £1 billion of SME lending over the next three years on the back of the changes.
For the London Chamber of Commerce and Industry, that is the right medicine. Whether it arrives in time, and survives a change of government, is another matter.
Karim Fatehi OBE, the LCCI’s chief executive, said the Chamber “welcomes measures to improve access to finance for businesses, encourage innovation and strengthen the UK’s position as a global financial centre – positive steps which recognise the vital role London’s business community and economy plays in driving growth in every postcode.”
But the underlying mood among members is far from buoyant. According to the LCCI’s latest survey data, 49 per cent of London businesses believe the Government’s current approach to the economy will worsen UK economic growth.
“The Chancellor was right to emphasise the importance of economic stability,” Fatehi said. “As the country prepares for a new government, maintaining business confidence is critical. The next government must provide early certainty businesses need to plan for the future.”
The focus on SME finance will resonate well beyond the capital. Many smaller firms have ambitious plans to invest and export but, as Fatehi put it, “continue to face significant barriers to securing finance”, a problem compounded by pandemic-era borrowing that has left the average small business debt load at double pre-Covid levels, hampering access to new finance.
The Chamber’s sharpest message, though, was reserved for whoever occupies Downing Street next. “The next government must avoid further increases to the cost of doing business,” Fatehi said, “giving firms the confidence that they will not face additional tax or regulatory burdens, and delivering meaningful business rates reform rather than further delay. Sustainable growth cannot be achieved if rising costs continue to undermine businesses’ ability to operate.”
That call lands on well-trodden ground. Reeves has long acknowledged the case for overhauling a system she admits leaves the economy feeling “stuck”, promising to remove the cliff edges in business rates that penalise small firms taking on a second site. Business groups argue delivery has yet to match the rhetoric.
On Europe, the LCCI backed the Chancellor’s push for deeper ties with the EU, with Fatehi arguing that “London’s internationally connected economy needs a pragmatic new relationship that reduces barriers to trade, improves labour mobility and makes it easier for businesses to operate across borders.” That echoes mounting evidence that post-Brexit trade friction is worsening for exporters, with smaller firms bearing the brunt.
Fatehi’s parting shot was aimed at day one of the next administration. “The priority for the next government must be turning ambition into action, using the policy levers at its disposal to get London growing,” he said. “A thriving capital is fundamental to the success of the UK economy, generating investment, jobs and prosperity across the country. It is essential the new government recognises this from day one.”
For SME owners, the takeaway is twofold. Cheaper, more available credit and export support are on the way. But with a new occupant of No 10 imminent, the price of that support, in tax, rates and regulation, remains anyone’s guess.
