172. Labour’s new parliamentary majority is 172, making it the largest majority since 1997. Regardless of who you voted for, the country needed change.
For Directors of Limited Companies, of which many of my clients are, the Conservatives did very little in real terms for them, not least excluding them from much of the Covid-support that was available.
Small and medium-sized businesses (SMEs) have also experienced significant direct tax increases with the changes to things such as Corporation Tax, as well as indirect impacts through elements such as key allowances being frozen (despite substantial inflation rates) right through until 2028.
Now that Sir Keir Starmer has got his feet under the table and his legislative plan has been presented via the King’s Speech, we wanted to take a look at how Labour and small businesses are set to get along.
Labour and small businesses: Specific sectors set to receive a boost
For those businesses, large and small, in the construction, trade and house-building sectors, there is undoubtedly a lot to be cheerful about. The focus on getting Britain building is great news for those in these sectors and anyone who supplies to them. There is a clear plan to get this sector growing.
The same can be said for green energy and infrastructure.
By removing barriers, streamlining processes, and providing investment, businesses in these sectors should see demand increase which means growth and more employment opportunities. With a savvy business owner at the helm, and the right plans, financial controls and management in place, turnover and profits could improve for many SMEs.
Labour and small businesses in these sectors should get on very well. However, it begs the question, “what about every other industry and sector?”
There is no mention so far of any other sector receiving specialist support and investment, nor is there any SME-wide support being presented either.
Labour and small businesses: What is missing?
Conspicuous by their absence is the lack in any mention of grants, investment programmes, incentives, or support for SMEs.
One of Labour’s core messages is about growing the economy, and 99% of the business population are SMEs. It seems a baffling omission to not have considered and communicated any investment or grant plan to support SMEs.
Is economic growth solely going to come from construction, green energy, and infrastructure? In the absence of any other explanation, it seems that is Labour’s focus.
Business Rates review
The one aspect which has been mentioned is that there will be a review of the ‘unfit for purpose’ Business Rates.
A review is certainly needed as there are anomalies, inconsistencies and unfairness in the current system. However, no timescales or parameters for this review have been articulated, meaning that many business owners now face uncertainty, and anxiety about the potential for another unexpected bill to pay in the near future.
Labour has managed to create an air of uncertainty in the market, and that can cause hesitation in both business progress and their owners’ decision-making.
Another missing piece….late payments
“The lack of promised legislation to tackle late payments and poor payment practices by bigger businesses to their small business suppliers is the most serious omission for our community and will hold back economic growth. This scourge hampers cashflow and stifles investment, and we call on the Government to look again and deliver on the promise it made.”
So says the Federation of Small Businesses, and they aren’t wrong.
Cashflow is one of the single biggest causes of business failure among SMEs. Although there are lots of steps you can take to manage cashflow and mitigate issues, Labour and small business legislation being put in place would prevent large businesses from taking advantage of SMEs.
Employment Rights
The Employment Rights Bill is one of the flagship pieces of legislation for the Labour government. It will introduce a variety of new workers rights, including (this is not an exhaustive list):
- A ban on “exploitative” use of zero-hours contracts
- Ban of fire and rehire practices
- Extension of parental leave, sick pay and protection from unfair dismissal from day one on the job
- The right of all workers to sick pay from the first day off
- Flexible working arrangements available from day-one for all workers, with employers required to accommodate this as far as is reasonable
- Ban on dismissing any woman who has had a baby for six months after her return to work, except in specific circumstances
- A new Fair Work Agency to enforce workplace rights.
Labour and small businesses are potentially going to clash in the area of the expansion of employment rights, as they are often highly contentious issues.
Employment rights – zero-hour contracts
Among the SME business owner community, there is apprehension around the prospect of a ban on zero-hour contracts. Everyone can agree the banning of exploitive, discriminatory, and unfair practices is right. While some employers fly close to the wind or indeed completely ignore the rules, many do not and are anxious about the burden and potential costs this places on them.
For example, there are, in certain situations, genuine benefits to employees and business owners to zero-hour contracts because they provide both with flexibility which is absolutely necessary when there are peaks and troughs in demand. Exploitative practices should be stopped and legislation will help with that. Can there not be a solution where Labour and small businesses both get what they want here; a ban on exploitative practices and flexibility in contracts?
Employment rights – flexible working
Additionally, many SME business owners are concerned about the right to request flexible working from day one of employment. The concerns are around being able to comply with these requests, the financial implications resulting, and team management resourcing.
Pretty much every study done into flexible working has found (and quantified) that the benefits of it far outweigh any negatives. Flexible working does not only mean hybrid or home-working, it can also mean flexi-time, job sharing, compressed hours, annualised hours and much more. This can give both employees and business owners a great deal of flexibility to get the job done to its optimum efficiency and effectiveness.
It provides the opportunity for other members of the workforce to be able to do roles they may have been unable or excluded from before. This widens your potential talent pool and enables your business to access untapped talent if you can provide some flexible working arrangements.
Your employees will have the right to ask for flexible working, and requests should be seriously considered. However, a request does not mean business owners have to agree. You have the right to refuse so long as you have valid reasons for doing so.
Looking beyond 5 years
Despite the fact there is not a great deal in Labour’s current plans for SMEs, one thing that is encouraging is the tone and pitch of their agenda, in that they are looking for longevity to their policies and prepared to tackle some of the longer-term challenges.
Rather than looking simply at what they can implement and deliver in these 5 years, Sir Keir Starmer is talking about 10 years and beyond. This gives Labour significant scope to address some of the more time-consuming and slower burn challenges rather than simply ignoring them or kicking them down the road.
What next for Labour and small businesses?
It is of course early days for the new Labour government and their agenda for small businesses.
At the current time, it does not look like much will rapidly change for SMEs, nor any additional support flow their way. A narrow band of sectors will benefit more immediately and this will support them directly, as well as the supply chain who support them.
The expansion of employee rights is causing concern among business owners, so communication and planning how those will be implemented and managed will be crucial. This will allow SMEs to access the benefits of an increased and more productive workforce while removing exploitative and discriminatory practices. The expansion of employee rights cannot simply become an additional paperwork burden for business owners.
In our view, Labour needs to better recognise the importance of the SME market, and help it to grow through a meaningful plan and relevant support measures. SMEs employ huge volumes of people and provide the backbone of the economy. At the moment they are continuing to be neglected, and that must change!