The polls spoke on May 7 when the UK voted to bring the Conservative Party back into Government by a small majority. And this week the Queen laid out the Tories’ new plans for the next five years in her speech to mark the State Opening of Parliament. There were some promises for business, but not as many as small company owners might have hoped. But, what was on offer for Britain’s SMEs?
Action on late payment
The new Business Secretary, Sajid Javid, knows a thing or two about business – his parents ran a clothing shop in his home town of Bristol and he helped out in the family firm from an early age. Javid revealed measures to tackle late payment for SMEs a week ahead of the Queen’s Speech, outlining the creation of a Small Business Conciliation Service to intervene in disputes between small companies and large corporations over unpaid bills.
Late payment is certainly a big worry for small firms and their cashflow and can put them in danger of going bust, as we’ve detailed on this blog before. And while recent news from Experian that UK companies are paying their bills a day faster than during the last tax year sounds good, SMEs still have little power to complain when larger customers opt to change their payment terms or simply fail to pay their invoices.
- Three out of four UK businesses wait at least a month beyond their standard contract terms to be paid by debtors, according to recent findings from Bacs.
- More than a quarter need to borrow money elsewhere when they’re left out of pocket, and one in ten struggles to pay staff on time or settle their own regular bills.
Shockingly, it’s the biggest businesses that take the longest to settle up, the Experian data shows. Large corporates take more than 34 days on average to honour invoices, compared with the smallest firms, which pay up in just over 20 days. And the supermarkets remain among the worst offenders for leaving their small suppliers high and dry. So, any concrete help for small business owners on this persistent headache will be very welcome.
Reducing red tape via the new Enterprise Bill
The new Government has committed to a new Enterprise Bill, a major plank of which is about cutting the burden of regulation for small business owners. The headline figure is £10 billion – that’s the amount of red tape that will be slashed for small firms on top of the £10 billion worth cut in the last parliament. Javid has indicated that these savings will come through contesting European Union legislation and pressing EU institutions to reduce rules affecting SMEs.
Business owners are also being called upon to make changes themselves to the way regulation is implemented by talking directly to their local authority using Primary Authority, a scheme that means a business gets advice from one council on regulation as it applies to them, then the guidance must be respected by other councils, too. For example, an entrepreneur may ask for reassurance they can invest in new equipment without fear new rules will render the purchases non-compliant with the law. Councils will need to ensure they are uniform in the tips and advice they give to avoid confusion and reduce operational costs. Two out of three businesses already using Primary Authority are SMEs, but the reach of the initiative will be extended to others and access simplified.
Should we stay or should we go?
UKIP raised the issue of Europe during the general election, but now David Cameron has vowed to deliver an in-out referendum on Britain’s membership of the EU before the end of 2017. The Prime Minister has also committed to renegotiating the UK’s relationship with its European neighbours regardless of the popular vote.
Businesses hate uncertainty, so most business owners will want the issue settled one way or the other as quickly as possible. At present, it looks likely that the SME choice would be to stay in the European marketplace, though a lot can change in the coming months.
- 61 per cent of CEOs said they would vote ‘No’ to leaving the EU, according to research from leadership organisation Vistage.
- About one in four UK firms relies on exports, with Europe still being the most important territory for exporting British businesses.
- Many business owners support the idea of a new relationship with the EU – more than half of British Chambers of Commerce members want to remain in Europe with a renegotiated deal.
Whatever their personal view, most company bosses will hope our fate in Europe is decided as early in 2016 as Westminster bureaucracy can allow.
The best of the rest
Otherwise, there were several further commitments that could have an impact on small business owners, in particular to help them create more jobs:
- Provision of free childcare up to 30 hours a week for three and four-year-olds in England by 2017, a move that could help working parents and, therefore, employers looking to fill skills gaps with experienced staff.
- Rates for income tax, VAT and national insurance will be frozen for the next five years.
- A review of the business rates system to determine how it might be changed to be more sustainable, fair for companies of all types and sectors, and flexible for the future. A better method of appealing the unpopular tax will also be introduced for ratepayers.
So, no mention of SMEs’ lack of bank funding, not a word about poor skills among job recruits – another major concern for small business owners – and nothing on how to help Britain’s businesses grow. But the new Government has the next five years to show the small business community that it really is “right behind you” as Sajid Javid claimed in his maiden speech. Time will tell…