With May’s general election looming large, anticipation is mounting as to what will appear in the parties’ manifestos. Unfortunately, with custom dictating that they will not be published until mid-April, there will be little time to digest what they mean for small businesses. So, reading the runes, what can we predict?
The overall picture is good. Small businesses represent a third of private sector turnover and, with increasing numbers of people working on a self-employed basis, politicians are recognising this group as an important constituency. Mike Cherry, national policy chairman at the Federation of Small Businesses (FSB), says the major parties have been listening to the evidence his organisation has given them over the past 18 months, and he believes there is “fairly widespread agreement that there needs to be greater support”.
The economy
When it comes to specific policy areas, it is impossible to ignore the economy. Here there is clear blue water between the parties, with the Conservatives planning to cut public spending by £50bn more than Labour, and the Lib Dems positioning themselves somewhere in the middle. Debate will continue up until the final day about how best to tackle the deficit while fostering growth, and small businesses will need to make up their own minds about which party has the best approach.
Elsewhere, research by the FSB has found that 21% of members export goods or services, and these businesses will have been disappointed that the promised “export-led recovery” has not materialised. According to Manos Schizas, senior economic analyst at the Association of Chartered Certified Accountants (ACCA), party manifestos are likely to feature targeted interventions to kick-start this sector. “UKTI [UK Trade and Investment] has been given quite a lot of additional capacity and powers to assist exporters, but I would be surprised if there aren’t more pledges in this area, perhaps with specific industry flavours such as increasing cultural exports or exports in advanced engineering,” he says.
A key barrier to export growth has been weakness in the eurozone, and when it comes to Europe there is a clear division between the parties, with the Conservative Party and UKIP offering an in-out referendum and Labour and the Libs Dems refusing to follow suit. Indeed, Labour’s shadow minister for small business, Toby Perkins, argues that a referendum could further hit trade. “We want to see an expansion of the existing UKTI schemes, but we think the export trade is vulnerable to the sense that you can’t rely on our relationship with Europe being based on free movement of trade and labour.”
The Conservatives did not respond to requests for an interview, but the party’s 2014 European election manifesto argues that the party remains in favour of a European common market, and that it merely wishes to be liberated from EU “red tape”.
Regulation and support
Anyone who has run a small business will understand the challenges of keeping up with regulation, and the coalition has responded by trumpeting its desire to cut red tape. Most notably, it introduced the “one-in-one-out” rule, which had been mooted in the Lib Dems’ 2010 manifesto and which ensures that for every new piece of regulation introduced that affects business, another must be nominated for removal.
Labour appears to now be backing this policy, with Perkins hinting that the party may continue with it if elected: “While imperfect, one-in-one-out does at least create a competitive pressure in the heart of government to ensure all regulations are necessary and that we’re constantly reviewing them.”
Business support is another area which party manifestos are likely to address. Last year, the government launched growth vouchers to help small businesses receive strategic advice, and Schizas at the ACCA expects to see this scheme continue. “I’m almost certain we will see some suggestion of expanding the programme, most likely towards innovative spending or hiring new graduates and younger people.”
Labour has announced plans to set up a Small Business Administration (SBA), modelled on the US Small Business Administration, if elected. The SBA would aim to support business growth, and ensure access for SMEs to government schemes.
Access to finance
Much has been made of the role of the British Business Bank in improving the supply of credit to small businesses. Although the bank, which is designed to offer a one-stop-shop for SME funding, has yet to have a major effect on access to finance, Schizas is positive about the initiative. “I think almost all the parties will be unable to resist suggesting extensions to its remit. In a pre-election period, the temptation will always be to give it more of a retail banking remit, whereas at present it is set up merely as an investment vehicle for government.”
On other forms of funding, he adds: “We’re expecting a lot more pledges around ‘alternative finance’, particularly crowdfunding and peer-to-peer lending. As these markets are maturing they are likely be the subject of proposals around more favourable regulatory or tax treatment.”
Late payments
Late payments have been under the spotlight recently. In November the government launched a consultation proposing that large and listed companies should be required to report statistics such as the average time it takes them to pay suppliers. According to Schizas, the government has also been working to force its departments to pay more promptly, and encouraging major companies to sign up to supply-chain facilities that allow suppliers to borrow against their own credit-worthiness, easing the cash flow implications of late payment.
However, Perkins says that while Labour supports the government’s late payment proposals, they don’t go far enough. “What we’ve proposed is a reporting regime for FTSE 350 companies which would potentially be expanded to apply to any large business. It would mean companies would have to report incidences where they’ve paid suppliers late, and confirm that they’ve paid the corresponding interest in line with the EU Late Payments Directive. That removes the onus that currently exists on small businesses to pursue their customers.”
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