It doesn't make the headlines, but for small companies, politics does matter. Steve Noble, COO, of Ultimate Finance, looks at the manifestos of the UK's political parties and ask what they mean for small and medium sized companies?
Everyone has a vested interested in the outcome of a General Election regardless of their personal politics. Many business owners may claim to be too busy to pay much attention to the politicians on the media or on their doorstep as we approach June 8th but there’s little doubt that, whoever the winner, there are some changes ahead for small and medium sized enterprises (SMEs.) Some of these changes may be popular, while others may seem more like a hindrance than help, so it’s vital that you know what the main parties are proposing before entering the polling station.
So, what are the main parties saying, and how might their pledges affect you and your business?
All parties have made promises to alleviate the pressure on SMEs from various taxes. The Conservatives have pledged to increase the personal allowance for income tax to £12,500, and raise the higher rate threshold to £50,000. Labour has promised a full review of business rates, wants to increase corporation tax for large businesses, and bring in a lower small profits rate of corporation tax for SMEs. The Liberal Democrats see cutting business rates as a ‘priority’, and have also vowed to support entrepreneurship with a new scheme that would pay selected entrepreneurs £100 a week for six months to support their living costs.
What will this mean for SMEs? – There’s clearly good news for SMEs if either Labour or the Liberal Democrats win the election. Although the Conservatives haven’t made such explicit promises on business rates and corporation tax, the fact that their rivals are so hot on these issues should ensure that it’s kept near the top of the agenda during the new parliament.
Whatever your political preference, it’s good to see that the issue of late payments, long the bane of SME financial life, is now being taken seriously by the two main political parties. Labour have promised to “declare war” on late payments and will demand that all those bidding for government contracts pay their own suppliers in 30 days. Similarly, the Conservatives will ensure that business that don’t abide by the Prompt Payment Code will lose the right to bid for government contracts. They are also pledging to make one third of all government purchases from SMEs by the end of the next parliament; a promise that, if honoured, would potentially mean billions of extra income for SMEs.
What will this mean for SMEs?
It’s interesting to note both Labour and the Conservatives are planning to lead by example and instil good practice in companies that supply to the government, as well as supporting SMEs through purchasing from them. However, it remains to be seen how effective this would be in practice and if other businesses would be inspired to follow suit. We believe that businesses should work together more effectively on this to ensure late payments are no longer an issue for both larger and smaller businesses.
Labour has promised to ban one of the most controversial features of the modern economy: zero hours contracts and would do the same for the unpaid internships which have flourished in recent years. Labour also wants the living wage paid to all employees over 18 and to grant all workers equal rights from “day one”, including temporary staff. The Liberal Democrats have likewise proposed a ban on zero hours contracts and want to ensure rights derived from EU law, such as parental leave, endure post Brexit.
The Conservatives have proposed to double the Immigration Skills Charge to £2000 per year for each non-EU worker employed by a business. They have also vowed to offer a National Insurance holiday for businesses that take on ex-offenders, disabled people, and those with mental health issues.
What will this mean for SMEs?
Whichever party wins the election, rising staff costs are on the horizon, either via the increase in the Immigration Skills Charge or an enforced rise in the living wage. Employee costs are often a challenge for SMEs and these will increase, regardless of whether they have two employees or fifty.
There’s also a momentum growing across all parties to ensure flexible working arrangements are legally binding, with a stamping out of zero-hour contracts and moves to ensure employees are entitled to the same benefits as permanent, full-time employees. This may have an impact on sectors such as hospitality and construction which can tend to have flexible employment arrangements depending on projects and seasonality.
There’s a lot of talk about skills in each of the party manifestos, which is good news for the SMEs that depend on a pipeline of skilled labour to ensure both growth and competitiveness. The Liberal Democrats want to double the number of businesses that hire apprentices, develop national colleges to deliver high-level vocational skills, and increase advice in schools about entrepreneurship and self-employment. Labour want to create a National Education Service for England, double the number of completed apprenticeships at NVQ level 3 by 2022, and, notably, protect funding to SMEs that hire apprentices. The Conservatives are planning to launch new vocational qualifications called T-levels covering 15 subjects including construction, creative and design, digital, engineering and manufacturing, health and science.
What will this mean for SMEs? – All three parties have declared similar ambitions to invest in apprenticeships and skills as a commitment to the UK’s future workforce; this particularly welcome given the UK’s lowly position on world productivity league tables. Labour’s vow to support SMEs that hire apprentices is particularly interesting and it will also be interesting to see how the recently introduced Apprenticeship Levy would be impacted by these initiatives.
In conclusion, it’s clear that all the main parties are trying their best to secure the votes of SME business owners and there’s no doubt that some of the proposed policies will be welcome if they ever make it into law. However, as ever after an election the real test of the winning party’s commitment to SMEs will come when the new parliament begins and all these promises must become action.