The Finance and Leasing Association (FLA) is calling on the government to “provide incentives to help [small] businesses invest in new and updated equipment”.
According to recent figures, nearly a third of smaller businesses are not currently profitable and so do not qualify for existing tax breaks.
Making leased equipment eligible for capital allowances would help their potential for recovery, the FLA has said.
According to research by Oxford Economics and the Open University Business School commissioned by the FLA, economic recovery in the UK is “at risk from under-investment”.
The Oxford Economics research showed a 27% fall in business investment among SMEs between 2008 and 2009, while the Open University’s survey showed almost 20% of small businesses are struggling to upgrade equipment because of factors including poor cash flow.
FLA head of asset finance Julian Rose said: “This recession has seen the lowest ever levels of investment. Britain’s 4.7m small businesses should be the engine of recovery.
The risk is, without the tools to invest, instead of having the latest, high-quality equipment, the government will be faced with repairing rusting Britain.”