By Shalini Khemka, CEO of E2Exchange
Today the current economic climate is much more favourable to SMEs. Growth has returned, confidence is back and successive budgets have produced a raft of business/entrepreneur measures. However, we could still do more to improve the environment for SMEs which are such a critical part of our economy.
At a SME growth summit we held recently at the House of Lords attended by a number of senior business figures and leading entrepreneurs we developed a specific policy package designed to enhance the growth of SMES and help accelerate the UK economic recovery. We plan to present this package to the Prime Minister David Cameron’s Policy Unit at No. 10. An outline of our key proposals is listed below:
SME 2014 Growth Business Manifesto
- Consider establishing a separate team within BIS to give better guidance to entrepreneurs on the array of support/funding schemes available as low awareness and use is an issue.
- Reform SEIS to include widening the of sectors from which businesses are eligible, broadening the class of shares and doubling the £150,000 limit that can be raised.
- Abolish employers’ NIC for jobless people under 25 for 12 months and increase the NIC employment allowance for SMEs from £2,000 to £3,000 p.a. with the rate tiered according to the size of business in a similar way to corporation tax.
- Fundamentally reform to the business rates where the amount a company pays is as much dependent on its performance as the property value of its premises.
- Extend the UK’s current 24 enterprise zones into London and the South-East where the number of businesses account for almost one third of all UK SMEs.
- Provide greater financial assistance and support for exports such as a SME-specific dedicated export credit scheme.
Better Financial Guidance for Entrepreneurs
With over 700 separate Government SME support/funding schemes entrepreneurs have never had such a plethora of choices. However many complain that they are not aware of many schemes — for instance in a recent survey we conducted 35% of respondents had not heard of EIS and 60% had not used the scheme to raise funds — while others are unsure about which scheme offers the greatest benefits.
We would recommend considering establishing a dedicated team within BIS to give advice to entrepreneurs on the myriad schemes available to improve awareness and take up.
Further reform SEIS
While the Chancellor’s recent move to make SEIS permanent is a welcome measure we would like to see further reforms of the scheme, primarily allowing a broader class of shares to be included, eg preference shares, widening the variety of sectors from which businesses are eligible and doubling the £150,000 limit that a company can raise under its rules.
Target NICs — key tax on jobs
As NICs are fundamentally a tax on employment, we would like to see the rate tiered according to the size of a business in the same way that corporation tax is charged at different rates for large and small businesses.
We also believe abolishing employers' National Insurance Contributions for jobless people under-25 would help Britain’s hard-pressed businesses and tackle the issue of youth unemployment. We want also to see more targeted support for SMEs with an increase in the NIC employers’ credit from £2,000 to £3,000 per annum.
Fundamentally Reform Business Rates
Fundamental reform of the business rate system is long overdue, we favour moving to a system where the rates a company pays depends as much on its performance as it does on the property value of its premises.
Extend enterprise zones
The enterprise zones have provided much needed business rates and NIC relief to start-ups and SMEs around the UK. Given that nearly one third of SMEs are located in London and the South East, it seems only natural to propose an extension to the zones to cover this region.
Currently only one in 25 businesses exports their products and services. The recent Coalition Government initiative to double the amount of lending available to exporters to £3 billion, and cut the interest rates charged on these loans by one third will certainly help some of the businesses looking to grow overseas.
We are calling for specific measures to help SMEs export such as a dedicated export credit guarantee scheme, with possibly broader and higher non-payment risk insurance schemes and enhanced credit risk sharing facilities as well as better support in their understanding of issues around the rules, regulations and administrative requirements involved.
The purpose of this package of initiatives is to help to ease the financial burden of employment tax, business rates and accesses to funding that is disproportionality borne by SMEs, and assist them in taking full advantage of the gathering recovery to boost their own growth prospects.
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