Concerns about possible tax changes in the forthcoming Budget are weighing on business appetite for commercial borrowing, according to Atom bank’s latest SME Pulse.
Atom bank’s quarterly survey of commercial mortgage brokers points to a clear pause in sentiment as businesses await the Chancellor’s plans on 26 November. Brokers report clients either accelerating decisions or holding off entirely amid speculation over changes to property taxation and Capital Gains Tax.
MOUNTING CONCERN
The SME Pulse for the third quarter shows that unease is now widespread. Almost all brokers surveyed – 92% – said their clients were concerned about potential property tax or Capital Gains Tax reforms, with more than half describing their clients as “very concerned”. Anxiety over possible alterations to business rates was nearly as pronounced, with the majority reporting some degree of worry among clients.
This uncertainty is feeding directly into investment decisions. Two fifths of brokers said their clients were holding back until the fiscal outlook becomes clearer following the Budget, adding further drag to a market already on edge after months of speculation about tax rises.
SOFTENING DEMAND
Against that backdrop, demand for external finance appears to have stalled. Half of brokers said client appetite for commercial borrowing was unchanged, a rise from the previous quarter. The number reporting growing demand slipped by five percentage points to 41%, suggesting momentum has cooled.
Brokers nevertheless believe that any relief on tax or business rates could quickly reignite activity. Almost all respondents said they expected borrowing appetite to increase if costs were cut, with nearly half predicting that clients would use cheaper conditions to invest in new premises. Almost a third said businesses would be likely to expand their workforce.
GREEN LENDING
The Pulse also explored attitudes towards improving energy efficiency in commercial premises. More than a third of brokers said they were not currently discussing these upgrades with clients. Yet 90% believed their clients would be inclined to borrow for such improvements if the Budget included new incentives for green investment.
The findings suggest that opportunities in green finance may be going untapped, even as businesses weigh rising energy costs and the longer-term advantages of more efficient buildings.
Tom Renwick, head of business lending at Atom bank, said brokers were seeing the direct impact of fiscal uncertainty. He said: “Demand from business borrowers seems to have plateaued, with exactly half of the brokers polled for the SME Pulse reporting no change in appetite. And the reason seems pretty clear – this month’s Budget.
“Given the uncertainty about potential changes to the tax system, some business owners are understandably opting to pause their plans until they have a clearer picture of their future costs.
“Tax represents a significant outlay for SMEs, so it’s little wonder brokers are seeing so much concern among their clients about the likelihood of larger bills.”
He added: “A focus on overheads is perhaps also influencing considerations about energy efficient improvements.
“Businesses want to reduce their energy bills, whether driven by financial concerns, environmental worries, or both.
“However, that will only be possible if the sums add up, which is why owners will be keen to see whether the Chancellor will outline relevant tax incentives.”
Renwick said lenders would need to be ready to respond quickly once the Budget is delivered. He said: “What will be key for businesses as they pursue their next steps is access to easy, fast and flexible finance.
“Brokers clearly believe that in the event of new business incentives, their clients will want to act.
“Lenders need to be ready to support those borrowers once the dust settles post-Budget, while brokers will need to prioritise working with lenders best placed to support their SME clients.”
