Yesterday, Jeremy Hunt announced the UK’s significant investment into finance and technology has made it become the ‘next Silicon Valley’ during his speech in the House of Commons for the Spring Budget

The UK has become a hotbed for fintech innovation, becoming one of the leading markets for startups and big tech companies amid an increase in business investment to 10.6% of the country’s GDP. 

Addressing MPs, the UK Chancellor of the Exchequer stated: “Outside the US we have the most respected universities, the biggest financial services sector and the largest tech ecosystem in Europe. 

“We have doubled the AI startups anywhere in Europe, doubled the venture capital investments in the tech economy, now double the size of Germany and three times the size of France. We’re on track to become the world’s next Silicon Valley.”

However, the focus on large tech investment has seemingly alienated smaller businesses across the country, who are feeling the brunt of the continuing economic pressures and marginal recession the UK has faced over the last year. 

Whilst Hunt announced a two-year extension to the Recovery Loan Scheme and cuts on national insurance, small and medium enterprises (SMEs) – often labelled as the lifeblood of the UK private sector – continue to struggle amid high inflation. 

Theo Chatha, CFO of Bibby Financial Services, believes that the Spring Budget should have addressed greater support for SMEs by providing more funding needed to help them not only survive, but reinject new revenue streams to the country’s overall economy. 

He said: “The budget was a fine balancing act of managing the UK’s fiscal position, while stimulating growth. While the small business community will breathe a sigh of relief at the two-year extension of the Recovery Loan Scheme (RLS) announced today, more needs to be done to support UK SMEs to grow and thrive amid a tough credit environment.

“The reality is that high-street support for these businesses is fading, and without this, SMEs –  99.9% of the country’s private sector – will be unable to deliver the growth the country needs.

“We would urge policy makers and the British Business Bank to reinvigorate the underused Bank Referral Scheme to direct SMEs to alternative funding providers. Though economic forecasts are showing signs of improvement, the next six months will be critical to returning the UK to sustainable growth. Access to a wider array of financing options for SMEs must be at the heart of this.” 

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Elsewhere, despite national insurance falling from 10% to 8%, UK inflation remains at 4.0%, still significantly affecting consumer and business spending in a cost-of-living crisis that appears to be not fading. 

This has resulted in consumers budgeting on household goods and services over the last two years. In addition, there is a rising reliance on instalment-based payment methods such as buy now, pay later to balance funds which in turn, is affecting local and smaller businesses to attract consumer interest. 

Cheddar Founder and COO, Luke Ladyman, believes that the national insurance cut won’t do much to benefit consumers if the price of goods continues to remain high, admitting that many are “struggling to see a light at the end of the tunnel”. 

He said: “Consumers are still grappling with the cost of living crisis, and the latest Spring Budget hasn’t significantly loosened its grip on household finances. Whilst inflation has been falling, price increases still profoundly impact consumers who are struggling to see a light at the end of the tunnel.

“Households across the country won’t feel the benefits of the 2p cut in National Insurance. It’s the same as announced in the previous Autumn Statement, and won’t provide the general public with the financial relief they need now as it didn’t then. 

“We see this impact first-hand, when interpreting consumer spending habits. Our data collated from a subset of over 100k Cheddar users, shows a 14% uplift in recent spending at discount grocers – yet only a 0.44% increase in overall spending.” 

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Typically, in times of economic strife, businesses often look to new and innovative methods to break out of the financial turmoil by integrating payment methods that are beneficial to the consumer. 

Open Banking has often been touted as a means for businesses and consumers alike to access high-performing data to accurately manage funds and navigate potential pitfalls, which Ladyman reaffirms.

“Our money simply isn’t going as far as it did last year – or even last month – and at the same time, the government continues to fail to help people overcome this struggle,” he continued. 

“Investment in practical and easy-to-access tools for consumers to improve their financial wellbeing, has never been more important.

“Open Banking can play a vital role here, with its various, innovative applications empowering consumers to successfully navigate the spiralling cost of living crisis.” 

Against a difficult economic backdrop, UK payment providers have become increasingly focused on providing seamless, quicker and smarter transaction methods to meet the demands of consumers as they continue to manage their funds. 

There has also been an increase in vocal awareness in consumer protection to fraud, which has seen an uptick, in particular APP fraud, as fraudsters aim to capitalise on low consumer monetary confidence.