Small Businesses will lead the UK out of recession

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Companies House registered a growth in new businesses of 10 per cent to 362,300 in 2009/10, up from 330,100 in 2008/9.   This compares with the previous years - 2007/8 company incorporations fell by 17 per cent to 372,000 in 2007/8, followed by a drop of 11 per cent to 330,000 in 2008/9.The emergency budget's changes to corporation tax should encourage entrepreneurship further. The 1 per cent reduction in corporation tax to 20 per cent for small firms and the threshold for entrepreneurs’ relief on capital gains tax rising from £2 million to £5 million can only help the growth of small businesses and is to be welcomed.

However, small businesses have not welcomed the planned increase in VAT from 17.5% to 20%. On average its estimated that the change will cost small businesses as much as £1,500 to make the administrative changes. It is also bound to put some consumers off making large purchases once its introduced, though expect to see a surge in sales in the run-up to Christmas as shoppers seek to beat the rise.

One other possible piece of good new is that the Business Secretary Vince Cable has announced the first phase of his plan to curb ‘excessive regulation’ of businesses earlier this year. If the coalition government keeps to its promises on this it may help to reduce the burden of regulation on small businesses in particular.

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