What SMEs want from the next government

Pick up a newspaper, switch on the TV or browse social media and it doesn’t take long to find news about large multi-national businesses. Who’s up, down, in, out, offshoring, onshoring, embroiled in scandal, changing CEO or channeling income through a low tax country.  

I get it, they’re important. But in total large corporates employ fewer people and do less business than the small and medium-sized enterprises (SMEs) in the UK whose voices are seldom heard.

Being smaller and mostly owner-managed, SMEs are more entrepreneurial, flexible and innovative than their bigger competitors. Because each are smaller, these firms can’t exercise undue influence on the market and are not constrained by any limits on market share – so inevitably have more potential for growth and job creation. Because these companies are British-based, these jobs are much more likely to stay in the UK and any profits are much more readily taxable here. 

Inasmuch as Germany has been more successful than the UK in the post war era most people put that success down to the achievements of its Mittelstand or SME companies. Our SMEs are successful too, but if we want to get ahead in the future the next government should place more emphasis on supporting them. 

So as an SME businessman (I owned, ran and sold a £150m turnover company and have now started a new venture employing 70 people) I’m calling on all parties to address the following points in the forthcoming election.

1. Stop helping large companies get bigger 

If you really want to develop a more diverse economy focus government procurement, tax policy, legal architecture and grant incentives on helping smaller companies get bigger not on bigger companies growing further. Come down hard on aggressive tax avoidance that means we have to pay taxes while some of our competitors do not.

2. Listen up. The heads of large companies get more than enough “face-time” with ministers

SMEs do not. So let’s set up a national council of SMEs to meet with ministers on a monthly basis to re-dress the balance and also increase dialogue with small businesses at every level.

3. Money, money, money

Everyone knows SMEs are struggling to access the debt financing they could in the past. So we need different options including venture capital, crowdfunding, small capital listings, and seed capital for example. Extending and enhancing the EIS and SEIS investment tax relief schemes is one example of how government can help. Let’s develop others.

4. Ditch the poll tax for companies

Almost everyone now agrees that business rates are a pernicious form of tax. When I started Baxter Freight I’d had a £40,000 rates bill before I’d sent out the first invoice to a customer. 

Surely taxes should be levied on businesses when they’re successful not before they’ve started work? Business rates have helped decimate the high street and are a major obstacle for small businesses. Of course I also understand that they raise a lot of money  (£26 billion or 4.5 per cent of total tax according to the Institute for Fiscal Studies) and they’re very difficult to avoid. Nevertheless they either need scrapping altogether or at least substantially reforming so that new and small businesses get a much fairer deal. The coalition delayed the next revaluation until 2017, I’d say the next government should rule out revaluation until necessary reform has taken place.

5. Back to work

There are 4.9m businesses in the UK and about 750,000 unemployed 16-24 year olds. Let’s do a deal where instead of paying benefits to them you pay the same amount as a subsidy to our companies for a fixed period and get these people into productive work helping SMEs. Apprenticeships are important but not every job requires that form of training.

6. Reading, writing and ‘rithmetic

When young people come to us they need to be ready for work. Most of them don’t need degrees in astro-physics but they absolutely do need good skills in maths and English and to be confident communicators. Can schools focus on areas like commercial awareness as well as softer communication skills?  

7. Who wants to be a millionaire

And another thing: as Lord Young of Graffham has recommended we need to teach young people that being an entrepreneur is a great thing to do with their life. Not only does it give them a chance to make money it’s one of the most challenging and personally rewarding careers they can have. Yet it’s not the career of choice for most youngsters. Even business graduates mostly end up in big companies. If we want to help create new businesses this needs to change.

8. Tax doesn’t have to be taxing

Successive governments have promised us tax code simplification but in reality it’s still growing like topsy. Simple taxes are more collectable and much easier for us to administer and understand. It’s pork-barrel politics from an over-bearing state that stops this happening and that’s got to change.

9. Build: why is every planning decision so slow? 

The coalition has relaxed some rules but frankly we’d all benefit if things happened quicker. I’d also like to see more progress on developing our national infrastructure in the areas of road, rail and airports as well as mobile phone and broadband services.

10.  All we need is trade

We need to recapture our position as the greatest trading nation on earth. The next government must push hard for early agreement of the EU-US free trade agreement (Transatlantic Trade and Investment Partnership) so that UK SMEs can get free access to the world’s largest free trade bloc. More than that we need to make the case for free trade with as many countries as we reasonably can including numerous Commonwealth nations. Of course the UK needs to work towards reforming the EU but we should do so with the desire to remain in.

It’s no exaggeration to say that our future success as a nation depends on the future success of our SMEs. It is that success that will drive the growth in our country that we desperately need to pay off our national debt and to pay for our schools and hospitals. 

So I’d argue it’s vital that all parties start listening more to what SMEs have to say. None of them can develop successful policies without taking our views into account. So I hope we can enter a period of constructive debate and engagement in the run-up to the election and that we can hold politicians to their promises whoever wins.

Image: Shutterstock

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