The government announced in June the details of the Small Business, Enterprise and Employment Bill, which has some interesting provisions. The overall objective is to put small businesses at the heart of long-term sustainable growth. Two key aspects are the measures to improve SMEs’ access to finance and the measures to improve the burden on business created by regulation.
There are a number of access to finance measures. First, there are steps to remove clauses in business contracts that prohibit a business from selling its invoices to a third party finance provider. This is a bit legalistic but should better enable businesses to raise finance from their sales invoices. Second, there are a number of measures to tackle late payment – a particular problem for smaller businesses. There are also a couple of measures to improve businesses’ credit rating information. These will involve the big banks having to share data on their SME customers with other lenders through credit reference agencies, which must share the information with all lenders. Another part of this measure is aimed at improving small business access to credit by sharing non-financial VAT registration information. This extends only as far as the name and contact details of VAT-registered businesses. No financial data will be shared.
The other area of interest in the bill is around the regulation of business. There are three main aspects to this. The government believes that businesses covered by a regulator should have a right of appeal if the regulator makes a decision which has a negative impact on their business. Legislation will require government ministers to appoint a reviewer (or champion) for each regulator and the reviewer must check the effectiveness of the complaint-handling by the regulator and publish its findings. A voluntary system already exists for UK banks – and the appeals process for credit application refusals has already resulted in an extra £40m being lent in the first three years of its existence.
Perhaps the most interesting of the better regulation measures is the requirement for future governments to publish a deregulation target in their first year in power. The target has to measure the economic impact of new regulation on businesses. The draft legislation sets out plans for an independent body to verify the figures in much the same way as the Office of Budget Responsibility subjects the varioud government draft costings of tax and spending measures to detailed challenge and scrutiny.
Other noteworthy parts of the bill include measures to track students from education to the workplace, as well as reforming whistleblowing and employment tribunals. The government also wants to introduce a register of meaningful ownership for companies and simplify the current filing requirement for firms. Directors who have been guilty of wrongdoing in the past will also be barred.
Streamlining insolvency law to remove unnecessary cost and ensure effective oversight of insolvency practices was another measure announced in the bill along with a Pubs Code and Adjudicator to govern the relationship between pub-owning companies and their tied tenants. This will bring fairness to the sole traders and small businesses that run approximately 20,000 tied pubs across England and Wales.
Summarising the bill, Vince Cable, the business secretary, said: “The government is working hard to improve the environment for small businesses. Better access to finance for SMEs, measures to boost trust and transparency in British business and increasing fairness in the workplace are key issues that this bill aims to address.”
The Small Business, Enterprise and Employment Bill was presented to Parliament in July and is scheduled to complete its passage through Parliament in March 2015, shortly before the next election. I would recommend keeping a close eye on its progress between now and then.