The Autumn Statement For SMEs 
There were several proposals in the Autumn Statement aimed at helping small and medium-sized enterprises (SMEs) but there have been mixed views on how well they will work.

One of the most important was the proposed credit easing for businesses, which will mean that finance should be more freely available than it has been from the traditional sources such as banks.

However, the credit easing plan has already been attacked by Ed Balls, Shadow Chancellor, who said that it was very similar to the small firms guarantee scheme, which “has been around for years.”

And Manos Schizas, senior policy advisor for the Association of Chartered Certified Accountants (ACCA) said that the plans for credit easing “look like a cross between 2008’s failed Working Capital Guarantee and the European Investment Bank guarantees, which have experienced very low uptake in the UK...”

Other policies unveiled in the Statement include the extension of the Small business Rate Relief scheme, the income tax and capital gains relief for those investing in start-ups and the angel investment matching plans.

The small business rate relief scheme had been due to expire in October 2012 but will now run until April 2013, which could be worth over £200m to SMEs.

There was also good news for people who invest in start-up businesses, as they will now be able to gain 50 per cent income tax relief on investments of up to £200,000.

The Federation of Small Businesses welcomed both moves and said that they “will give start-ups and fledgling businesses the chance to bypass the high street banks and find alternative sources of finance.”

While Richard Anton, chairman of the British Venture Capital Association, said: "The Chancellor has today offered an invitation to invest in innovation. This is a rare case of a George coming to the assistance of dragons. Angel investors will be delighted."

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Autumn Statement Awaited 
All eyes will be on Westminster later today as Chancellor George Osborne delivers his autumn statement, which will include the Government’s plans to boost the economy as well as his response to economic forecasts by the Office for Budget Responsibility.

The statement will be delivered against a backdrop of dire warnings from all quarters that the UK is likely to slip back into recession and that the growth of the economy will be flat or weak at best.

Mr Osborne is likely to confirm that growth will be lower and borrowing much higher than planned and that the UK’s structural budget deficit will not be eliminated until much later than hoped.

Forecasts for growth have already been cut during the year and it is expected to be cut again to just 1 per cent, while borrowing is expected to more than double to over £80bn.

A number of plans have already been unveiled ahead of the statement. These include credit easing for business borrowers, an infrastructure fund, subsidised work and training placements for 18 to 24-year-olds, and 95 per cent loan-to-value mortgages for first–time buyers.

Mr Osborne is also expected to announce other schemes, such as the doubling of the number of free childcare places, in an attempt to get mothers back into work.

Other announcements may include a change to the bank levy, possibly scrapping or delaying the 3p rise in fuel duty, which was due to take effect in January, maybe scrapping stamp duty for first-time buyers and cuts in tax breaks for the very well off.

However, it is unlikely that there will be any proposals to slow down on spending cuts, as Mr Osborne has been quoted as saying that he wants the Government to “stick to the plan that will take us safely through the storm.”

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Government To Underwrite Loans 
Chancellor George Osborne will unveil plans to release up to £40bn in loans to small businesses when he delivers the Government’s autumn statement tomorrow.

Under one plan, the Government would underwrite banks’ borrowings so that they could pass on cheaper loans to companies turning over less than £50m. Loans would initially be for £20bn but this could be doubled.

Speaking on the Andrew Marr show yesterday, Mr Osborne said: "The basic idea of this national loan guarantee scheme is to use the fact that the government can borrow money very cheaply to help small businesses to borrow money more cheaply than they do at the moment."

"So the government will underwrite the loans the banks make to small businesses in order to cut the interest rates small businesses have to pay. This will help them with their cash flow, to retain their workforces and expand and invest."

Under the proposals, a company taking out a £5 million loan would be able to borrow at 4 per cent rather than the typical 5 per cent, a saving of £50,000 a year.

The chancellor will also propose that the government takes a stake in an investment fund with private sector investors to provide a source of credit or loans to medium-sized companies.

A third scheme would offer an alternative to traditional bank loans by encouraging firms to sell bonds, or company IOUs, to the market.

A treasury spokesman said: "We all know that the cost of finance for smaller businesses has risen following the financial crisis. It's a problem people have been trying to solve since 2008, which is why these new schemes are much more radical than anything that has gone before.

"They should be a game changer for credit for small companies by cutting the cost of finance and over time opening up new options for how it is raised."

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Growth Remains Unchanged 
Figures from the Office for National Statistics (ONS), published yesterday, show that UK economic growth remained at 0.5 per cent in the quarter between July and September of this year.

The ONS says output in the production industries increased by 0.4 per cent in the three months to September 30. And services output advanced 0.6 per cent, although output in construction fell by 0.2 per cent.

Some economists say that the growth is unsustainable and may be a precursor of a looming second recession. "Economic growth in the third quarter was driven by stock building and Government spending, neither of which is the basis for a sustained recovery," said Vicky Redwood, chief UK economist at Capital Economics.

And Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said “There is a good chance that we will see GDP fall in Q4 and the longer that the crisis in the eurozone remains unresolved, the greater the probability that we will suffer a full-blown recession in the UK.”

However, a Treasury spokesman said the UK economy was "not immune to the turbulence in the eurozone and its impact on British businesses" and that the Government was “using all levers to protect the UK economy.”

Earlier this week, the Bank of England’s Inflation Report warned that “the prospects for the UK economy have worsened” and suggested that growth will not exceed 1 per cent in either 2011 or 2012.

The report added that the growth outlook is “unusually uncertain” due to a lack of concrete action on the eurozone debt crisis. The Bank said the problems in the continent are the “single biggest risk” to the UK’s economic health.

The Bank has forecast that the economy will stagnate in the next three months of this year, and is likely to grow at between 0.7 and 0.8 per cent next year.

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MPC Puts Further QE Plans On Hold 
Minutes from the November meeting of the Bank of England’s Monetary Policy Committee (MPC) show that it has been decided not to boost the current £275bn package of quantitative easing (QE) any further until at least February.

The minutes said that there was “little merit in fine tuning” and that it will take “ a further three months” to complete the latest £75bn installment, voted for in October.

Since inflation remains “materially above target”, it appears that the Bank is concentrating on bringing it down to nearer the 2 per cent target, which might take longer than the two years it has been suggesting.

The minutes said: “it remained a possibility that (inflation) would be slower to fall during 2012 than the pace implied by the committee’s central projections.”

Reaction to the minutes from analysts was that they were much as expected. Philip Shaw of Investec said: “No huge surprises from the minutes. In particular the unanimous votes to keep policy on hold was as expected, but also that the committee seemed to dismiss the idea of increasing the quantitative easing target and stepping up the pace of purchases.”

And Vicky Redwood of Capital Economics said: “The vote showed that the new, lower set of inflation forecasts did not persuade any members to vote to increase the QE programme straight away, with the Committee voting unanimously to leave policy unchanged. But given that the extra purchases announced in October are not yet finished, that was not a surprise.”

While the committee’s nine members voted unanimously to leave QE on hold for the time being and for interest rates to remain unchanged at 0.5 per cent, it was split on the likelihood of more QE after February. However, most analysts expect this to happen.

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