Any other business

A look at the contents of the Small Business, Enterprise and Employment Bill

9 min read

16 March 2015

Former editor

It serves as the centrepiece at the heart of the government's commitment to make the UK the best place in the world to start and grow a business – the kind of vintage glass of port at the end of a meal it hopes people will be waxing lyrical about in the future. But what exactly is in the Small Business Bill – Real Business has had a look.

Sponsored by business secretary Vince Cable, who is arguably the brainchild of the legislation, the Small Business, Enterprise and Employment Bill (simplified to Small Business Bill) is “designed to reduce the barriers that can hamper the ability of small businesses to innovate, grow and compete”.

The current government, led by David Cameron and Nick Clegg, and with the help of Cable’s Department for Business, Innovation & Skills (BIS), has implemented a number of “business-friendly” policies since it came into power back in 2010.

From its Red Tape Challenge, which aims to reduce the amount of administration businesses must comply with, to its high street-saving Portas Pilots, the coalition has had varying degrees of success. The now fully-operational British Business Bank, headed up by Keith Morgan, has pulled all of the government’s business finance initiatives under one roof (Angel CoFund, StartUp Loans, Enterprise Finance Guarantee included).

However, it will probably be the “to be determined” success of the Small Business Bill that will largely decide whether the government got it right when it comes to helping SMEs in Britain.

To give you a better understanding of the contents of the bill, Real Business has analysed each of its 11 sections and boiled it down into a digestible format. We’ve selected the most important parts of each.

(1) Access to finance:

Unsurprisingly finance tops the list, as it has frequently been cited as the biggest impediment to growth. Here are the headline initiatives in this space.

  • Remove legal barriers to invoice finance
  • Incentivise businesses to improve policies and practices
  • Helping challenger bank and alternative finance providers conduct risk assessment on SMEs
  • Direct banks to refer SMEs that have been turned down for finance to online alternatives
  • Enable UK Export Finance to help more exporting businesses

(2) Regulatory reform:

As mentioned with the Red Tape Challenge above, there has been a concerted effort to reduce the burden of administration. Also building on the One-in, Two-out drive, here are the the most important inclusions.

  • Make it easier to incorporate a company and register for tax purposes
  • Entrench in law deregulation target similar to the One-in, Two-out approach 
  • Create “statutory definitions” for small businesses and micro businesses
  • Ensure that agreeing to business use of home does note result in creation of business tenancy
  • See to it that all new regulations are reviewed regularly and not creating “unnecessary burdens”

(3) Public sector procurement:

Public sector procurement has long been the playground of bigger businesses which are able to handle the mountains of paperwork and constant audits required. The new approach is favouring smaller businesses.

  • Enable small businesses to gain better and more direct access to this market
  • Simple and consistent approach to procurement across all authorities
  • Provide minister for the cabinet office or secretary of state with “general power” to investigate processes and practices
  • Provide government with ability to implement measures relating to public procurement in the future

(4) Childcare and schools:

We’ve seen shared parental leave come into force alongside flexible working regulation, but there is still a feeling that parents, in particular mothers, are not being given the requisite tools to conduct work of some sort in the aftermath of having a child. Here’s the Small Business Bill’s approach.

  • Allow information from HMRC and Department for Work and Pensions to be shared to provide funding related to the early deception entitlement
  • Remove requirement for schools to register separately with Ofsted for provision of two year-olds
  • Enable multiple premises to be included in single registration for provision of childcare

(5) Companies: Transparency:

From moves aimed at better clarifying who directors of particular companies to giving shareholders insight on remuneration, transparency has been a major part of this government’s efforts to level the business playing field. Here are the new suggestions.

  • Require companies to keep a register of people with “significant” control over a company
  • Deter, identify and sanction those who hide interests to facilitate illegal activities
  • Abolish bearer shares, which are used for illegal activities
  • Prohibit the use of corporate directors, countering use of “opaque arrangements” with company directors

Read on to find out about contents relating to directors’ disqualification, insolvency, employments and the pub industry.

(6) Company filing requirements:

A spelling blunder committed by Companies House in 2014 showed how much of a devastating reaction inaccurate information can cause, with one such company having to bring a claim against the register for negligence and breach of statutory duty of care. The Small Business Bill has thus proposed some solutions

  • Simplify the current filing requirements for companies
  • Remove duplication and complexity 
  • Improve accuracy and integrity
  • Make it easier and quicker to remove inaccurate information

(7) Directors’ disqualification

Again, picking up on the theme of transparency, the government wants to make sure businesses, and the individuals running them, are engaged in honest activity.

  • Modernise and strengthen director disqualification regime
  • Give business community and consumers “greater confidence” that wrongdoers will be barred
  • More opportunities for creditors who have suffered from director misconduct to get compensation

(8) Insolvency:

With a recession brings a fair amount of insolvencies, and questions on how this is conducted. The approach of the Small Business Bill centres on making it easier

  • Modernise insolvency framework through increasing creditor engagement in the process
  • Strengthen regulatory framework for IPs to deal “effectively and efficiently” with poor performance and abuse
  • Reserve power to “pre-pack” administration sales to connected parties if criteria not met
  • Provide greater confidence to unsecured creditors and other affected stakeholders

(9) Employment:

There are some big additions to the employment law framework during 2015, as documented by our five-part feature series, and this is what you can expect from the Small Business Bill on the issue.

  • Reform whistleblowing for best practice
  • Deter business non-payment of employment tribunal awards by creating “strong financial consequences”
  • Reduce delays in employment tribunals caused by postponements
  • Increase penalties on those underpaying workers
  • Make exclusivity clauses in zero-hours contracts invalid and unenforceable 
  • Recover exit payments from public sector employees that leave an re-join within year

(10) The Pubs Code Adjudicator and the Pubs Code:

We’ve lost a lot of pubs during the recession, and the way some are “bullied” by corporate pub groups has led the government to create specific legislation.

  • Introduce Statutory Code of Practice to govern relationship between large pub-owning companies and tied tenants
  • Create independent adjudicator to enforce code
  • Address imbalance in bargaining power between two parties
  • Measures to also include Market Rent Only option
  • Require large pub-owning companies to offer tied tenants the right to bemuse free-of-tie at certain “trigger points”

(11) Education evaluation:

As analysed in the current Real Business focus (Addressing the UK’s skills gap), there is a need to make sure children and young adults have the necessary skills for an evolving economy.

  • Measures to provide “new and improved” information on learning outcomes by tracking students through education into labour market
  • Gain insight on destinations of former students
  • Provide evidence to enable schools and colleges to direct students