Knowing what practical action will be taking place regarding significant challenges is one potential way to assuage the fears held by small businesses and entrepreneurs. It also keeps them ‘in the know’ about those supporting them, and the wider business climate.
Small businesses and entrepreneurs face myriad challenges, but the Federation of Small Businesses (FSB) frequently lobbies to try and change policy. I spoke with its National Chairman, Mike Cherry, to clarify what the most prominent challenges will be for start-ups and small businesses in 2018, and what will be taking place to improve the current situation.
What lobbying events do you have coming up throughout 2018?
MC: The focus for us this year is hosting events at the various political party conferences to get cross-party support for the issues that matter to small businesses. What politicians say on the platforms of these conferences is the litmus test for how pro-Small-business they really are. With the UK now 14th in the world league for ease of setting up in business, we want to see proposals that move us higher – and nothing that will knock us any further down.
What are the most important things you are lobbying for in 2018?
MC: A really big problem for many small businesses is being treated badly by bigger business’ customers – late payments, poor payment terms, supply-chain bullying. Sometimes small suppliers are kept waiting more than 100 days for payment. These unfair and debilitating practices have to be stamped out. Business Rates is another big issue, with a completely arbitrary and out-dated system of taxing small firms. We have had success in securing short-term support for badly affected small businesses, but this has to continue along with a longer-term overhaul of the whole system. And of course Brexit will figure heavily in 2018 – small businesses need a time-limited transition period to avoid any sudden cliff-edge in 2019. Beyond that, a pro-small-business Brexit will ensure the opportunities of future trade deals can be maximised for the economy.
Why are these such important issues?
MC: Late and poor payments lead to 50,000 small businesses a year going bust. Many more go through the financial stress of having to wait outrageous amounts of time to be paid, which is bad for the economy as a whole as well as individual businesses. On Business Rates, large and unfair hikes in bills put some businesses in jeopardy, and the system is unfit for the digital age.
How confident are you that you will get results from these issues?
MC: The government recently listened to FSB and appointed the first Small Business Commissioner, Paul Uppal, who has already pledged to FSB members that tackling late and poor payment will be his number one priority, so there is room for plenty optimism. The government has also listened to FSB on Business Rates in 2017, setting up relief funds for the worst-affected small firms, and so there’s clearly a strong awareness that this system is far from ideal.
What’s the plan if certain issues do not get traction?
MC: The collapse of the services and construction giant Carillion has shone a light on how a global corporation treated its smaller suppliers. Many more politicians and members of the public are now aware of the unfairness of poor payment practices and the damage that can be caused down the supply chain. More generally, across a number of issues, FSB has good engagement with leading politicians across the UK’s main political parties, which allows us to keep our members’ concerns on the agenda.
The statistics listed on your site for non-employing businesses are significantly higher (79% of last year’s increase) than employing businesses. This is a pretty shocking trend. Why are there so few non-employing businesses?
MC: It’s certainly true that self-employment is growing, and within a couple of years the number may exceed the number of people employed in the public sector. Recent government statistics showed a rise in the number of small businesses and self-employed from 5.5 million to 5.7 million. So in that sense, it’s a very encouraging sign of a thriving entrepreneurial culture, with more people taking the exciting step of branching out on their own. But there is a need for those start-ups to be supported, so they can thrive, grow – and potentially start employing staff.
What are the challenges stopping business owners being able to employ people?
MC: There’s a combination of both cost and administrative pressures on small business employers. Last year, for example, pension auto-enrolment was extended to small employers. While it’s important for the country as a whole that people are setting aside enough money for their retirement, this change has put extra financial pressure on small firms – and more paperwork. There are also annual increases in the National Living Wage. FSB has always been supportive of the National Living Wage and before it the Minimum Wage, but there would be greater incentives to employ more people if part of that cost could be offset with support in other ways, such as employer national insurance.
What is being done to raise the number of employing businesses? How successful do you think these efforts will be in raising this number by 2018?
MC: In many ways, the direct costs of employing people fit into the bigger picture of cost pressures on small businesses more generally, including for many rising rents and sky-high business rates. FSB estimates that the cost of doing business is at its highest for five years once you roll all of these things together. And so political decision-makers need to be on the side of smaller businesses, not chucking extra taxes and bureaucracy in their way, which hinders growth and in turn suppresses the number of people they employ. It was very pleasing in last November’s Budget that the Chancellor listened to FSB and decided against lowering the threshold at which firms get dragged into the VAT system. Had that gone ahead, it would not only have been an extra tax for more than a million extra small firms, it would also have taken their owners an estimated six days a year to fill in all the paperwork.
Why are there more businesses per person in southern England than elsewhere in the UK?
MC: It’s vital for the UK economy that growth is spread across all of its regions and nations. At FSB, we have long called for better infrastructure and connectivity – from road and rail upgrades to better broadband coverage. We are also very supportive of the Northern Powerhouse and Midlands Engine. A bit at a time, improvements are made – such as plans to scrap the tolls on the Severn Crossing – following a long campaign by FSB Wales. But there are lots more ways in which investment could be prioritised to make it easier to do business wherever you are in the UK. It’s true that a lot of bigger businesses in particular choose to cluster around London and the South East. Although we do hear of some smaller businesses being priced out of London, not least by soaring rents and business rates.
To get involved with the FSB, visit its website here.