There were no rabbits in Labour’s manifesto and only five mentions of small business in the entire 136-page document. This is despite SMEs accounting for three fifths of the employment and around half of the turnover in the UK private sector – 16.7m employed by an SME and turnover estimated at £2.4tr.
Labour says government is at its best when it is working in partnership with business, and it will kickstart economic growth with a new partnership with business to boost growth everywhere.
To truly grow the economy a Labour government would need to prioritise small business growth and funding. The commitment to cap Corporation Tax at 25% for the entire parliament as well as retain a permanent full expensing system for capital investment and the annual allowance for small business, are barely going to move the dial, and will certainly not set the world alight for those SMEs currently struggling with rising costs, too much red tape, and insufficient access to the right support.
It is estimated that the UK is suffering from a £22 billion funding gap for SMEs, who are poorly served by traditional funding routes. Combined with an application process that is time consuming and opaque, and a return to higher interest rates, there is a clear need for businesses to have clarity of the funding options available to them.
It will be interesting to see the detail in Labour’s plans for the British Business Bank, which it says it will reform, including a stronger mandate to support growth in the regions and nations, to make access to capital easier.
The new government should look to shake up the British Business Bank by ensuring it increases its partnerships with alternative finance providers and it holds regular consultations with UK SMEs and the financial services sector, to get real time findings of the challenges facing businesses and what they really need. It should also seek innovative new ways to increase lending across the board.
To reverse the long-term trend of the falling availability of growth finance and access to alternative finance options, businesses need to better understand the finance options available to them, whether that be in growth finance, debt consolidation and refinancing, or other business loans.
The UK must continue to invest in infrastructure, technology, and regulatory frameworks that support data-driven innovation. This includes fostering collaboration between government agencies, regulators, industry stakeholders, and academia to develop and implement policies that promote a thriving smart data economy. By ensuring all banks and financial services firms operate on the same open banking footing, restarting, and retooling useful initiatives like the Designated Finance Platform, and driving a smart data economy in alignment with global trends, the UK can reposition itself as a leader once more in the digital economy and in open banking.
There is much for the Labour government to grapple with in the coming weeks and month as it seeks to lay the foundations of the next five years. It is great to see delivering economic security is the first of its six early steps as a new government, but SME growth and support must be a key part of that if we are to see true change under a Labour government.
