The Federation of Small Businesses (FSB) pre-election survey of 1,341 small businesses revealed 96 per cent of small business owners intend to vote. However, 20 per cent had yet to decide which party to vote for, while a third had committed to a party but were open to changing their mind.
Some nine in 10 small business owners are concerned business taxes could increase under the next government, while 92 per cent are worried about a rise in employment costs and risks associated with recruitment. More than half (53 per cent) noted rising energy costs and 61 per cent flagged inflation as a risk over the next five years.
The findings follow the release of FSB’s manifesto for small businesses and the self-employed people to encourage growth and entrepreneurship and reduce the cost of doing business for UK’s 5.5 million small firms. It aims to increase the number of small businesses to pre-pandemic levels of six million by creating better conditions for businesses within the next Parliament.
Small business manifesto to drive economic recovery, innovation and jobs
FSB’s Policy Chair, Tina McKenzie, says the manifesto outlines more than 150 proposals covering tax, innovation, a new mechanism for late payments and sustainability measures to drive economic recovery, promote innovation and create jobs across the country.
The FSB is pushing for a Small Business Act to tackle systemic late payments that impede investment, planning and growth. Other initiatives aim to make access to finance fairer and reduce the need for personal guarantees that force entrepreneurs to put their homes and other assets on the line when taking out finance.
The manifesto calls for a fundamental reform of UK business rates to help revive investment, employment and growth. Increasing the small business rates relief threshold to £25,000, removing disincentives to expand into further properties and moving revaluations to an annual cycle would help small businesses.
Other tax measures include:
- Increasing the employment allowance annually in line with any increases to the National Living Wage to prevent stealth tax rises on employers as wages increase.
- Ruling out increases of tax for self-employed people, including tax on dividends for directors of limited companies and National Insurance for the self-employed.
- Maintaining Entrepreneurs’ (Business Asset Disposal) Relief at least to the level of the previous lifetime allowance for pensions, given that many small business owners plan to use their business to fund retirement.
- Increasing the VAT threshold to £100,000 and keeping this in line with inflation.
- Setting HMRC a target to reduce business tax compliance costs by 30 per cent within three years.
Cashflow squeeze in spotlight
Paying businesses on time addresses the critical issue of small business cashflow.
FSB is pushing to:
- Mandate payment performance to be reported in large company annual reports.
- Set legal limits around 30-day payment terms if payment practices do not significantly improve.
- Increase the powers and resources of the Small Business Commissioner to independently investigate poor payment practices.
- Establish a business disputes resolution portal for small business.
- Introduce a 33 per cent small-to-medium enterprise (SME) statutory public procurement target to boost small business participation in taxpayer-funded projects.
- Increase by 5,000 the number of start-up loans, creating a new enterprise allowance for aspiring entrepreneurs and committing to SMEs at least half of all direct government funding of private research and development (R&D).
Main parties pledge to support small business
The economy remains the centre of the electoral battlefield between the two main parties. Labour has proposed planning and growth initiatives, with a focus on late payments, overhauling the business rates system, high-street growth to level the playing field with online rivals and scaling opportunities. Responding to Labour’s plan for small business, McKenzie applauded the move to pass new laws to help small businesses.
The Conservatives’ small business policies are focused on apprenticeship investments, regulation, and the implementation of a new women-led investment taskforce. It pledged to further cut National Insurance contributions and has committed to not increase income tax, capital gains or corporation tax.
The party vowed to create Town Boards in 55 towns across the country, bringing together community leaders, employers, local authorities and the local MP to decide the best way to spend a £20 million fund.
R&D tax credits, investment and EU access top wishlist
Dunstan Power, director of engineering consultancy firms, Bytesnap Design and Versinetic, says the R&D tax credit system was a “mess and caused confusion”, believing the UK was falling behind other countries on innovation as a result. He says simplifying tax payments by better resourcing HMRC, increasing the level of business asset disposal and a “lighter touch R&D credit system” would help his business innovate with new product developments.
His companies operate across Europe, but this had been impeded by Brexit. “It now takes two weeks to get goods into Europe that used to take two days,” Power says. Goods shipment and recruitment of overseas skilled workers were “very expensive and bureaucratic”. He believes “closer customs union with Europe” and easier recruitment policies would provide relief for small businesses.
Michelle Ovens, founder of advocacy group Small Business Britain, believes improving access to finance would supercharge startups and help them commercialise. She says there was a need for “more government-backed policies focused on micro-lending and scale up, recognising that financing for growth remains a huge issue for small businesses”.
Smarter and more inclusive investment was needed for under-represented groups, such as female-led and disabled-led businesses, she says. Specifically, a Disability Finance Code for Entrepreneurship and enhancing the Invest in Women Taskforce to include micro-finance.
