In his regular column, Malcolm Durham from Flexible Directors, talks about what he calls Bejams - Businesses that are “Just About Managing, and what Theresa May and her government can do to help.
My acronym doesn’t refer to Bejam, the frozen food retailer that was taken over by Iceland in 1989, which, if I know my readership well, was audited by some of you. It’s my attempt to bring to Mrs May’s attention those Businesses that are “Just About Managing”.
I understand that rateable values need to be adjusted every five years as populations move and values go up and down. But business models change in that time too and these new values seem to take no account of the effect on revenues of such fundamental changes as on-line retailers. It’s not that councils are unable to innovate: in Monmouth they have recently levied an additional charge on cafes which have seats on the pavement. So Costa can provide seating but Coffee #1 needs money for a new coffee machine and has taken its chairs in (and probably written off their capital value: another cost).
Growth is not solely achieved by SMEs - Metro Bank, a FTSE 250 company, has created hundreds of jobs; and Kraft's focus in its bid for Unilever was reducing the cost of its investment in the future. But that reinforces my point - larger businesses can choose how far and how fast to grow. Larger organisations with the breadth of their activities, lower cost ratios and accumulated reserves have greater choice over their future than SMEs. They can take short term cost increases, defer expansion plans and watch the share price recover as they do so. Small businesses generally need to innovate and grow and adding costs that seem excessive compared to some of the new competitors in retail/distribution hinders this.
By and large business does better with the minimum of interference from Whitehall and County Hall. But I think that a Government as smart as this one could better walk its talk and properly debate how it can create the right environment for growth, especially in retail which is such a large part of our economy, and particularly for B-Jams. Two measures occur to me:
- We need to rebalance rateable values between so called retail and so called distribution. The transitional relief doesn’t do that, as Tim Wetherspoon pointed out; and
- We should extend the small business rates relief beyond the small to the B-Jams. This would help to level the playing field for SMEs that are growing but don’t yet have the economies of scale of their large competitors but who can extend choice and value for consumers.