Shadow chancellor John McDonnell has called on the government to end uncertainty over Brexit, amid claims it is causing some big businesses to engage in “corporate bullying” by refusing to pay smaller firms.
Speaking to a gathering of small businesses at the Labour party conference in Liverpool, McDonnell said he suspected the government would enact article 50 “towards the end of next year”, but that a lack of direction was having a detrimental impact on small business.
Martin McTague, policy director for the Federation of Small Businesses (FSB), claimed larger firms had stopped paying suppliers in order to protect themselves against a possible Brexit backlash.
McTague said: “There is almost an element of corporate bullying. After Brexit a lot of large companies decided they needed to boost their balance sheet so they made a unilateral decision not to pay their suppliers. I think that is scandalous.
“The government has introduced a proposal which is trying to address that but it is a major problem for many of our businesses.”
McDonnell said the lack of clarity over Brexit was creating problems for businesses. “My own view [before Brexit] was that the economic consequences wouldn’t be felt immediately but would be incremental, with the undermining of certainty and confidence in our economy.
“So far there’s been an uncertainty in government in terms of who’s leading on what and who’s taking the decisions, and also what the negotiating timetable is.
“Peeping down letterboxes and whispering through keyholes at No 10 it looks as though they’ll be looking to trigger the article later next year rather than sooner, due to the outcome of various European elections which are being awaited.”
McTague said the FSB wanted to secure the “best possible Brexit deal” for small business, which included access to the single market.
McDonnell said he believed that although membership of the single market would be preferable, simple access was the more realistic prospect.
During a question and answer session, one small business owner, Gary McDonnell of catering company Empty Plates, claimed he had lost almost £50,000 due to companies changing their name in order to avoid having to pay him.
He said: “It’s daylight robbery. Even if I’m not bankrupt I can say I’m company A today but tomorrow I’ll be company B, and leave all that [debt] behind.”
The shadow chancellor told him Labour was looking at rewriting company law in order to stop the practice.
He said: “I don’t think there’s an MP that hasn’t had a complaint like that in recent years, it affects people’s jobs, it’s a scandal. We might be able to get an agreement with government in place and get it in sooner rather than later.”
On Monday the shadow chancellor announced the party would introduce a minimum wage of £10 an hour if it was voted into power.
And while McTague said his members were not against it “philosophically”, he said many would be unable to pass on such costs.
He said: “The majority of our members pay well above the minimum wage. It’s not so much about our desire to suppress wages but our members need time to adjust to the changing environment.
“One example that was brought to me recently is a company supplying the automotive industry. They’re on a declining contract so they have to cut costs every year. If at the same time the government is increasing those costs you’re going to get a lot of companies going out of businesses.”
McDonnell said a policy review body would look at introducing “compensatory measures” for small business. He said: “The last thing we want to do is introduce a living wage that has a detrimental impact on jobs.
“But what we can’t have is a situation where we’re in the fifth richest economy in the world and children are in poverty even though both of their parents are in work.”
McTague said a study by the FSB had revealed confidence among its membership had fallen this year for the first time since 2012, blaming uncertainty over Brexit and general concerns about the underlying health of the UK economy.
He added that although 55% of members said they were optimistic about the future, the impact of big business postponing investment was “filtering down”.
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