The Association for Consultancy and Engineering has called on Chancellor George Osborne to support small companies that employ a disproportionate proportion of the workforce.
The Department for Business, Innovation and Skills Business Population Estimates for 2011 found that SMEs made up 72.4 per cent of construction turnover and 84.5 per cent of construction employment.

However, ACE's Benchmarking Lite study revealed that 17 per cent of small engineering firms were loss-making as revenues fell short of outgoings, while small companies face a wait of 76 days to be paid for the work they do.

Relatively small changes to administration costs could yield significant improvements even for struggling firms. For example, the combined effect of freeing up 10 per cent of admin time for project work for each member of staff could reduce losses by 30 per cent.

ACE chief executive, Nelson Ogunshakin OBE said: 'The Chancellor has an opportunity in this budget to support small business as real drivers of growth. Easing the administration burden, for example by raising the VAT threshold or combining PAYE and National Insurance would significantly improve competitiveness.'

ACE has also called for more to be done to support small business finance while credit markets remain restricted. To do this government could look to underwrite SME overdraft facilities in some situations.

Among ACE's recommendations in its budget submission on helping SMEs to deliver growth are:

The Government should combine PAYE and NIC. This will reduce the size and cost of administering these taxes to all businesses.
The Government should raise the VAT threshold, because the level of administrative burden increases significantly once companies pass this point. Raising the threshold would help to ensure that a company has enough resource to deal with the burden imposed by VAT.
The Government should look to simplify the definitional aspects of the tax system. This would make the calculation and understanding of the system much simpler for companies. As is shown by ACE's Benchmarking Lite results a small reduction in administration can have a significant effect on profitability. This in turn increases the prospect of investment employment and growth.
Considerations need to be made for SMEs. Currently, tax rules are targeted more towards the larger and multinational companies.
The tax system should recognise that the level of tax burden changes significantly across small to medium enterprises.
Initiatives such as the Business Payment Support Service should be continued as they help SMEs by allowing businesses facing financial difficulties to spread tax payments over a manageable timetable. Small businesses that employ fewer than ten people would often prefer a range of payment options that remove the need for paying lump sums.
Providing certainty within the tax system is key to businesses with regards to assessing their liabilities and future investment potential. Tax reforms should be published as part of a larger roadmap outlining key steps and actions that will take place over the next 15 year period.
The Government should further explore the possibility of underwriting SME overdraft facilities. This would help to address some of the cash flow issues experienced by SMEs without the need for radical tax reform. Criteria could be put in place in relation to the percentage available based upon a business's current credit conditions, turnover, staffing, and spending patterns.

To read ACE's budget submission in full, please click here.