If SMEs had the Right to Vote, who would they choose?

June 6, 2017

With the election coming up this Thursday 8th, we thought it would be fun to look at each major party’s manifesto and consider them from a purely small business perspective. More than just a sure-fire way to avoid any trickier subjects of social morality in the office, it’s also an interesting subject for savvy small businesses owners who are on the fence and might want to consider casting their vote to the party who resonates with their company goals.

So, leaving social consciousness aside, if one was to vote purely for an SME’s needs, which party would win? What would a company do if given the chance to exercise one of the key assets of democracy? In this piece, we have a quick look at some of the main points of each party’s SME manifesto and their vision for the business world…

Labour

Labour have stated that they’d like to reinstate the lower small-business corporation tax rate. This is great news for the millions who make up the ‘S’ in ‘SME’ where these extra funds would definitely come in handy for growth. The lower-rate doesn’t seem to be defined but I may have missed it in the 81-page manifesto. They’d also like to introduce a package of reforms to business rates, following the much-disputed increase in April this year, which many felt were unfair to smaller companies already struggling with the likes of increasing rent. As an attack on the increasingly bureaucratic demands on business, they would also scrap quarterly reporting for those with a turnover of under £85,000. Finally, as we see all too often at LawBite, late-payments for SMEs can be crippling and we handle many disputes between parties in this area. Labour have, therefore, declared a ‘war on late payments’ through a couple of government-supported initiatives, including binding arbitration and fines for persistent late-payers.

On the other hand, Labour states that it will ‘amend company law’ so that directors have a duty not only to their shareholders but also to its employees, the environment and the wider public. These wider duties are not defined. From an SME’s perspective, this could mean an added layer of responsibility and obligation for the directors, which could mean less focus on growing the company itself. Labour also focuses on dramatically increasing rights in the workplace in favour of workers. Amongst the proposed policies, we have all staff being given equal rights from day one (whether permanent or temporary) , banning ‘zero hours contracts’ and raising the Minimum Wage to the level of the Living Wage (expected to be £10 by 2020). This is obviously great for the individual but not so much for the Bank of SME and might arguably discourage companies from hiring, which is good for no-one. Finally, it appears they would like to give more power back to the trade unions by repealing the Trade Union Act that in March 2017 saw tougher action brought against trade unions to inhibit industrial action, and they would also like to roll-out ‘sectoral collective bargaining’ and guarantee that unions have access to workplaces so that unions can speak to members and potential members too. Could this signal a disruption in ‘business as usual’ for SME’s?

Conservatives

On the plus side, the Conservatives would like to slash Corporation Tax for every business big or small – to 17% – the lowest rate of any developed economy. This could be a huge boost to business cash flow and would encourage investment and jobs for UK SMEs. They will also address the business rates system for smaller companies and make longer term reforms to address concerns about how it currently works, for example, by conducting revaluations more frequently to avoid large increases, which put an immediate strain on cash resources, as well as introducing self-assessment and taking into account the impact of online shopping on what is essentially a physically-based tax. They also emphasise their continued support of entrepreneurship and small business with the continuation of current favourable policies, but also through new initiatives such as ensuring 33% of central government purchasing will come from SMEs by the end of parliament, and applying the proposed energy tariff cap to micro-SME’s.

On the other side of the coin, the Conservatives would like to continue to increase the National Living Wage to 60% of median earnings by 2020, which would benefit individuals on a lower wage. Whatever one’s views on the social desirability of this measure, this could be detrimental to businesses with already high staff overheads and discourage them from hiring additional resource, which they may need to grow. Furthermore, they would like to review the rights of workers in the current ‘gig’ economy. They acknowledge that there has been a dramatic change to the way in which people work, which provides a high degree of flexibility but has also been benefitting smaller companies who might not have the funds to employ full-time staff. If this review means that the Conservatives start to force traditional workers’ rights upon this kind of flexible, part-time arrangement, this could be problematic.

Lib Dems

The Lib Dems would expand the activities of the state-owned British Business Bank so that it can play a greater role and assist growing firms with their shortage of equity capital and provide long-term capital for medium-sized businesses. As a hand to our much-loved UK start-ups, they would also create a ‘start up allowance’ to assist new businesses with the likes of living costs in the crucial first weeks of their business. Again, the Lib Dems would also look at business rates and see how they could be improved to reduce the financial burden on smaller firms, making them the priority for future talks. This would certainly be a massive help for small businesses who saw cash flow further dwindle through April’s revaluation.

However, the Lib Dems also want to re-evaluate certain business-related tax reliefs too, such as Entrepreneurs’ Relief on capital gains tax that has been incentivising business owners through their already difficult journey. They would also like to reverse a number of what they regard as ‘unfair and unjustified’ tax cuts for businesses such as the Conservatives’ proposed cuts to Corporation Tax, and reversing reductions in capital gains tax and Dividend relief. Naturally, this could be a blow to businesses and would surely impact smaller firms too, who appreciate the benefit of tax relief as both a cash-flow aid and a longer-term incentive.

Looking at all 3 of the major party manifestos and what they would do to help SMEs, it appears that there are both pros and cons in each manifesto and that each party sees a clear balance to be struck between incentivising SMEs on the one hand and promoting wider social responsibilities such as protecting workers’ rights. Is there one party that is better than the others for SMEs? How much do they mean what they say in their Manifestos anyway? It was noteworthy that in the much- trumpeted May v Corbyn Question Time last week, barely a single question was asked or answered about the needs of those companies that make up 99% of our economy. Maybe we just need our own party instead..?

Clive Rich, CEO and Chairman LawBite