As the UK General Election approaches, all the major political parties have made their traditional bid for votes via the publication of their manifestos. Given the enormous contribution that SMEs make to the UK economy, it’s no surprise that parties of all colours have announced polices that aim to court the good opinion of SMEs.
But what exactly are these policies and, if implemented, what will they mean for SMEs during the next parliament? Steve Noble of Ultimate Finance talks to Finance Monthly.
Given the recent furore over business rate rises, all parties have made promises to alleviate the pressure on SMEs from various taxes. The Conservatives have pledged to increase the personal allowance for income tax to £12,500, and raise the higher rate threshold to £50,000. Labour has promised a full review of business rates, wants to increase corporation tax for large businesses, and bring in a lower small profits rate of corporation tax for SMEs. The Liberal Democrats see cutting business rates as a ‘priority’, and have also vowed to support entrepreneurship with a new scheme that would pay selected entrepreneurs £100 a week for six months to support their living costs.
What will this mean for SMEs? – There’s clearly good news for SMEs if either Labour or the Liberal Democrats win the election. Although the Conservatives haven’t made such explicit promises on business rates and corporation tax, the fact that their rivals are so hot on these issues should ensure that it’s kept near the top of the agenda during the new parliament.
Whatever your political preference, it’s good to see that the issue of late payments, long the bane of SME financial life, is now being taken seriously by the two main political parties. Labour have promised to “declare war” on late payments and will demand that all those bidding for government contracts pay their own suppliers in 30 days. Similarly, the Conservatives will ensure that business that don’t abide by the Prompt Payment Code will lose the right to bid for government contracts. They are also pledging to make one third of all government purchases from SMEs by the end of the next parliament; a promise that, if honoured, would potentially mean billions of extra income for SMEs.
What will this mean for SMEs? – It’s interesting to note both Labour and the Conservatives are planning to lead by example and instil good practice in companies that supply to the government, as well as supporting SMEs through purchasing from them. However, it remains to be seen whether this is the right approach to take. We believe that businesses should work together more effectively on this to ensure late payments are no longer an issue for both larger and smaller businesses, rather than pointing fingers of blame.
Labour has promised to ban one of the most controversial features of the modern economy: zero hours contracts and would do the same for the unpaid internships which have flourished in recent years. Labour also wants the living wage paid to all employees over 18 and to grant all workers equal rights from “day one”, including temporary staff. The Liberal Democrats have likewise proposed a ban on zero hours contracts and want to ensure rights derived from EU law, such as parental leave, endure post Brexit.
The Conservatives have proposed to double the Immigration Skills Charge to £2000 per year for each non-EU worker employed by a business. They have also vowed to offer a National Insurance holiday for businesses that take on ex-offenders, disabled people, and those with mental health issues.
What will this mean for SMEs? – Whichever party wins the election, rising staff costs are on the horizon, either via the increase in the Immigration Skills Charge or an enforced rise in the living wage. Employee costs are often a challenge for SMEs and these will increase, regardless of whether they have two employees or fifty.
There’s also a momentum growing across all parties to ensure flexible working arrangements are legally binding, with a stamping out of zero-hour contracts and moves to ensure employees are entitled to the same benefits as permanent, full-time employees. This may have an impact on sectors such as hospitality and construction which can tend to have flexible employment arrangements depending on projects and seasonality.
There’s a lot of talk about skills in each of the party manifestos, which is good news for the SMEs that depend on a pipeline of skilled labour to ensure both growth and competitiveness. The Liberal Democrats want to double the number of businesses that hire apprentices, develop national colleges to deliver high-level vocational skills, and increase advice in schools about entrepreneurship and self-employment. Labour want to create a National Education Service for England, double the number of completed apprenticeships at NVQ level 3 by 2022, and, notably, protect funding to SMEs that hire apprentices. The Conservatives are planning to launch new vocational qualifications called T-levels covering 15 subjects including construction, creative and design, digital, engineering and manufacturing, health and science.
What will this mean for SMEs? – All three parties have declared similar ambitions to invest in apprenticeships and skills, which are welcome pledges as the UK looks towards Brexit and considers its competitiveness. Labour’s vow to support SMEs that hire apprentices is particularly interesting and it will also be interesting to see how the recently introduced Apprenticeship Levy would be impacted by these initiatives.
In conclusion, it’s clear that all the main parties are trying their best to secure the votes of SME business owners and there’s no doubt that some of the proposed policies will be welcome if they ever make it into law. However, as ever after an election the real test of the winning party’s commitment to SMEs will come when the new parliament begins and all these promises must become action.