The last UK government has been judged by how they handled the challenges presented by Covid, Brexit and the war in Ukraine. It may not make for headlines, but the impact of these decisions were felt by SMEs across the nation – to say nothing of the disastrous Truss/Kwarteng budget that saw interest rates skyrocket.
So at the Opening of Parliament, the new Labour government was quick to grab some positive press. The question is – will SMEs once again be the afterthought? I’ve pulled together what I think will be the most impactful changes proposed in the King’s Speech last month and with the caveat that it’s still early days and the devil will be in the details, I think there are reasons to be optimistic.
National Wealth Fund
In a move to reduce red tape and make it easier for SMEs to have access to loans and grants, the National Wealth Fund will align with the British Business Bank.
BBB already supports £12.4 billion of finance into small businesses, but the grant system can feel very hit and miss: at Swoop, we spend a lot of time educating customers on what help they are entitled to.
It’s worth mentioning the Growth Guarantee Scheme (GGS) here – a holdover from the last government, brought in to replace the Recovery Loan Scheme (RLS). This was an outstandingly popular program, with the government underwriting 70 percent of the value of pans worth up to £2 million. GGS takes over from where RLS left off and I cannot see any reason for abandoning a scheme with such a proven track record of success.
Establishing Great British Energy
One of the big issues that affected businesses was the hike in energy prices following the war in Ukraine. Establishing Great British Energy is Labour’s solution to preventing business energy bills from hitting this crisis again. Great British Energy will focus on lowering costs and increasing investment in renewables. For some time, businesses seeking to reduce energy consumption through solar panels, improved processes and other technologies have been supported by grants, so we are expecting this to be expanded, possibly with support of the National Wealth Fund. Energy bill stability is great news for SMEs, as is support for innovative businesses finding sustainable energy solutions.
Employment rights and skills
Two bills, the Employment Rights Bill and Skills England Bill could make a significant impact on SMEs.
New employment rights will see flexible working become a default, the removal of zero-hours contracts and a ban on fire-and-rehire. There will also be a push to increase wages which have stagnated over the last decade or so. These measures are likely to hurt some SMEs which may struggle to pay the wages bill and have to introduce new processes to keep track of hours worked.
On the upside, one of the regular complaints from business founders is a shortage of skilled workers. The Skills England Bill hopes to address this by mirroring and expanding the Institute for Apprenticeships and Technical Education.
Labour is banging the drum for “making work pay” – they need to make sure making employing people pays as well, a difficult tightrope to walk.
OBR and Europe
Perhaps the biggest change will be cultural: SMEs have been harmed by economic instability and the new government’s response is twofold: first, the Budget Responsibility Bill which states that “any government making significant and permanent tax and spending changes will be subject to an independent assessment by the Office for Budget Responsibility (OBR).”
Second, there is a clear need for the UK to build better relations with our neighbours in Europe. After the hardest Brexit possible and an oven-ready deal that turned out to be half-baked, a change of leadership could mean that the restrictions placed on imports and exports may be open for further negotiations.
Conclusion
It is still too early to tell what the outcome of this government will be for SMEs and the new government has mixed messages with caution and optimism. I believe there is a lot to play for, there are no done deals and as a community we need to keep pressure up on the government to give up a framework within which we can grow. Because when we grow, we carry the economy with us. We need them to do a good job but let’s not forget: if they want to deliver on their ambitious plans for growth, they need us too
