As we approach the UK’s October 2024 Budget, we at RTC are eager to see bold measures to reinvigorate our small business landscape, strengthen our manufacturing base, and build a dynamic, fairer, greener economy. Recent data from the Department of Business and Trade reveals that half a million small businesses have disappeared since the start of the COVID-19 pandemic and the UK’s exit from the European Union. This is a worrying sign, given that small businesses are the backbone of the UK economy, contributing around 50% of private sector turnover and employing more than 60% of the workforce

Moreover, a higher proportion of the UK workforce – around one-third - is employed in micro-businesses, compared to one-fifth in Germany and only one-tenth of workers in the USA. As a result, small UK businesses are less likely to grow without support, as their leaders are busy working in the business or managing daily operations. They don’t have the time to work on growing the business and driving innovation. Being smaller, they have less capital to invest in growth and a lower risk appetite.

In addition, where there is appetite, finance is often hard to unlock in the UK and companies may look to funding sources elsewhere or look to exit early.

It’s a cycle that perpetuates the nation’s ‘productivity puzzle’ and is a major threat to the new Government’s commitment to growth.

If we want to break this cycle we need to turn the UK’s great track record in research and innovation into wealth-creating scalable businesses. This starts with implementing robust policies that incentivise and support entrepreneurs, stabilise the business support landscape, bolster our manufacturing sector, and connect local people with new opportunities.

Here’s how the budget could help to do it.

Incentivise Entrepreneurship and Reverse Small Business Decline

Small enterprises are the lifeblood of the UK economy, not only generating local jobs but also fostering innovation and competition. The risks associated with starting and growing a business are significant, and we need to make entrepreneurship worth people’s while. To reverse this decline, the government could consider:

Establishing a national Small Business Strategy that signals the Government's intent to make the UK the best place to start and grow a business and outlines long term support measures, providing entrepreneurs with a clear pathway from startup to scaleup and a commitment to a finance landscape across the country that supports this journey.   

Tax reliefs specifically for new startups and early stage businesses that help derisk by reducing the personal tax burden during the formative years of trading. Targeted incentives, like an enhanced Seed Enterprise Investment Scheme (SEIS), can also encourage more individuals to take the entrepreneurial leap.

Reform Business Rates, which disproportionately affect small businesses, by offering discounts for businesses in their first three years of operation and taking more small businesses out of business rate tax by increasing the rateable value threshold.

Stabilise the Business Support Landscape with Long-Term Funding

The current approach to business support is fragmented and short-term, with programmes changing so frequently that businesses struggle to access consistent help. We need a more stable and predictable business support landscape that offers businesses the certainty they need to plan for the future. We encourage the Chancellor to consider:

Long-term funding commitments underpinned by a national Small Business Strategy for business support funding, moving beyond the typical 12 or 24 month funding cycles. Multi year funding would allow for the creation of comprehensive business support journeys, from startup to scaleup, providing tailored assistance at each stage of growth.

National coordination and local delivery, with a Small Business Strategy, championed by central government, but delivered through devolved authorities who understand local needs. This approach would ensure that support is accessible to businesses across the UK, regardless of their location.

Outcome focused funding models that tackle the root causes of low enterprise and productivity levels. Instead of merely measuring outputs (e.g., number of businesses assisted), we should focus on outcomes like increased business formation rates, higher productivity, and growth in international markets.

Support the Manufacturing Sector as a Catalyst for Growth

Manufacturing remains the engine room of local economies, offering a multiplier effect that drives growth across regions. With wages in the sector typically 20% higher than other industries, manufacturing generates the wealth needed to support the foundational economy, from retail to hospitality. Our recommendations include:

Increased investment in manufacturing innovation, with grants and tax credits for manufacturers investing in research, development, and digital technologies that enhance productivity.

Flexible industrial strategy that recognises that the core competencies of manufacturers can be applied across multiple markets. Focusing too narrowly on specific sectors risks overlooking opportunities for diversification and growth.

Measures to better connect manufacturers with local, national, and international opportunities, including funding for supply chain development and support for proactively targeting global trade.

Use Supply Chains and Procurement to Catalyse Innovation

For the UK economy to thrive, we must leverage supply chains and procurement practices and see them as an opportunity to bring forward, test and commercialise UK Content and innovations that can then be sold across the world. By stimulating demand for UK owned content, we can boost exports and foster economic resilience. To achieve this:

Use public procurement as a lever for innovation, using procurement opportunities and investment in infrastructure to encourage the adoption of new UK innovations, supporting proof of concept and commercialisation. Government contracts should not just be awarded based on price but should also consider criteria like how UK innovations will be supported and the local economic impact.

Facilitate collaboration across the supply chain, connecting smaller businesses with larger firms to create globally connected supply chains that serve as springboards for exporting innovations worldwide.

Future Proof Skills Development and Emphasise STEM

A strong economy requires a skilled workforce connected with opportunities. As we look to the future, we must ensure our education and training systems are designed to meet the evolving needs of the economy. We recommend maximising the impact of the newly formed Skills England by prioritising:

Long term and future-proofed approaches to skills development, with funding for continuous learning programmes that allow workers to adapt to new technologies and industry needs as they evolve.

Increased investment in STEM (Science, Technology, Engineering, and Mathematics) education, starting at the primary level, to equip young people with the skills necessary for high-tech and manufacturing careers.

Expand apprenticeships and technical training programs, particularly in sectors such as green technologies and advanced manufacturing, which offer high growth potential.

At RTC, we are optimistic about the future and enthusiastic about working with national and local governments to deliver real impact. By championing entrepreneurship, stabilising the business support landscape, supporting manufacturing, and investing in skills, the upcoming Budget has the potential to set the stage for a stronger, fairer, and greener UK economy.

We stand ready to collaborate on delivering outcomes that matter for people, for the planet, and for the places we call home. Let’s make October 2024 the moment we lay the foundations for sustainable and inclusive growth that benefits everyone.