Sir Keir Starmer and the Labour Party won a landslide victory in the general election, winning 412 seats, and forming a new government after 14 consecutive years of Conservative rule.
Rising costs and inflation, increasing taxes and regulations, and declining consumer spending have characterized the past few years for small business owners.
Ahead of the election, we surveyed 1,750 small businesses to ask them what steps they would like the next administration to take to address these issues. Small businesses called for immediate help in a variety of areas, including tax cuts, simplified regulations, and increased financial support.
Now that we know which party will be in power, we can compare their campaign promises with the needs of small and medium-sized businesses in the country.
What do small businesses want from the new government?
Small businesses across the UK have made their priorities clear in the Small Business Manifesto. Here are their eight main demands for the next Government:
Reducing the tax burden – simplifying the tax system and increasing personal income tax allowances Raising the VAT threshold to £100,000 Tackling the energy crisis – applying strict governance to the industry and supporting SMEs with their energy bills Prioritising investment in SMEs – reducing red tape and making grants and loans easier to access Invigorating England's high streets – investing in local infrastructure to make city centres attractive for shoppers again and overhauling the business rates regime Tackling the £32 billion late payment crisis – providing small businesses with the guidance and financial support they need Supporting SMEs to adopt environmentally friendly practices – offering tax breaks and grants to businesses that invest in sustainable technologies Prioritising mental health for the self-employed – introducing a flexible statutory sick pay scheme and mental health support specifically for small business owners
Read the full report here.
“The new government needs to set a leadership tone and small businesses can be a catalyst for change across the economy,” said Bea Montoya, chief operating officer at Simply Business UK. “Our research shows that in the right economic conditions, small businesses could create more than 1.5 million new jobs. Neglecting this enterprising community would be a missed opportunity for the government. We hope the new leaders will act on their recommendations.”
“Small business has been left in limbo throughout the election and now it's time for Labour to double down and deliver on its manifesto promises.”
Will Labour deliver the changes needed to meet the aspirations of small businesses and help them thrive?
What is Labour promising small businesses?
It's impossible to know for sure what a Labour government will bring to small businesses, but its manifesto does lay out some key points.
Let’s look at what the Labour Party is promising on the following points:
No tax changes
Labour has said it has no plans to raise taxes for workers. There are no expected increases to National Insurance contributions, basic rate, higher rate or additional rate of income tax or VAT.
However, there are plans to cap corporation tax at 25%, which could help small businesses grow by allowing them to deduct capital investments.
On tax, Labour plans to “modernise” HMRC to tackle tax evasion. This will include further strengthening reporting requirements and investing in new technology to improve capacity. The overall aim is to close the tax gap and better support the economy.
Addressing the skills shortage
Labour plans to tackle the skills shortage by providing more training opportunities. One of its measures is to replace the current Apprenticeship Levy with a Growing Skills Levy. Labour hopes this will give small businesses more flexibility in how they train their employees, giving them access to a wider skilled labour pool.
Another way they are addressing the skills shortage is by turning teaching colleges into “technical colleges,” which would match vocational training to the needs of businesses and create new job opportunities for local communities, they say.
Improving workers' rights
The Labour manifesto sets out plans to abolish zero-hours contracts and ban fire-and-rehire practices, alongside the introduction of a real living wage. These changes could lead to improved employee satisfaction and productivity, and help stabilise the workforce for small businesses.
Growth and Innovation
Labour plans to give local leaders more economic powers and establish a local jobs system, which could make it easier for small businesses to grow in their local markets.
It also proposes creating a more stable research and development tax credit and establishing a new Office of Regulatory Innovation that would provide additional funding opportunities for small and medium-sized technology and innovation businesses.
And with 43 percent of small business owners we spoke to thinking funding and grants should be easier to access, this could be a popular move.
Supporting the growth of startups
Labour plans to make it easier for small businesses to access finance and investment. They want to achieve this by giving the British Business Bank more powers to invest in small businesses outside London.
It also said changes to the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme would enable them to more effectively support early stage businesses.
Labor also wants to create a “scale-up taskforce” made up of government officials, academics and industry experts, who say they will focus on improving policies that currently hinder business growth.
Eliminate late payments
It's no secret that late payments are a constant problem for small businesses, so it's no surprise that Labour has made fixing the problem a priority: they plan to “introduce tough new laws to eradicate late payments and make sure more money gets to bigger businesses.”
To reduce late payments, Labour says it will make large businesses more accountable by “making them report their payment practices in their annual reports” and ensure small businesses and the self-employed are paid on time.
This reflects public sentiment, with 39 per cent of small business owners we surveyed saying the government should provide more guidance and financial support to those struggling with late payments.
Abolition of the business tax system
Labour plans to replace business taxes with a new system that “balances the burden and levels the playing field between brick-and-mortar stores and online giants”.
Labor says the plans will fill empty shopfronts, boost entrepreneurship, encourage investment in small businesses and reduce the tax burden.
Export support for small and medium-sized enterprises
Improving the UK's trade deficit and export performance is another Labour priority, with small businesses facing rising export charges and supply chain disruptions since leaving the EU.
To change this, Labour wants to work with the EU to make things more efficient and remove some of the barriers associated with importing and exporting goods from the UK.
The goal is to expand these markets for UK exporters whilst shaping a new regulatory framework.
Labour says it will set up a Small Business Export Taskforce, working with the Federation of Small Businesses, to identify practical ways to simplify the process and provide an appropriate level of guidance to businesses.
Revitalizing Construction
A shortage of materials and skilled workers slowed the construction sector last year, and Labour's strategy to turn this around is to:
Build 1.5 million new homes and create opportunities for small builders and craftsmen. Strengthen planning capacity by hiring over 300 new planners across the public sector. Cut red tape in the current building planning system.
Brian Berry, chief executive of the Federation of Master Builders (FMB), said: “Stimulating local growth and delivering new homes is a good idea, but it's essential that local builders are involved in this process. Involving small businesses in the development of new towns ensures a supply of high quality and diverse homes whilst also creating wider benefits such as work skills opportunities.”
Preventing future energy bill crises
Following unprecedented increases in energy bills for small businesses, Labour has outlined its plans to prevent this from happening again, including:
Invest in clean, renewable energy through our Green Prosperity Scheme and provide low-cost energy to small businesses. Help British manufacturers to compete with their European counterparts. Invest in energy-saving measures such as attic insulation. Create Great British Energy, a public body focused on cutting costs.
Improving access to public contracts
According to Labour, billions of pounds are spent on public sector procurement each year, and it estimates that £30 billion could be set aside specifically for small businesses.
Labour is considering introducing a national procurement scheme to give small businesses a fairer opportunity to win public contracts. At least one small business would be shortlisted for every eligible contract and the tender process would be made less cumbersome to create a level playing field for small business owners.
New government elections: key dates for businesses to watch
Looking beyond the July election, small businesses are feeling more positive about the future, with 47% saying the change in government makes them more optimistic about their company's future.
We will begin to get a clearer picture of how a Labour government will impact small businesses when Parliament returns in mid-July, and the King's Speech on 17 July is likely to set the tone for what to expect from the government going forward.
Perhaps the first defining moment will be the party's first budget proposal this autumn, setting out its main fiscal policy for 2025.
More than a third (38%) of SMEs surveyed believed that Labour was the party that would best represent their interests. As SMEs play a vital role in the UK economy, delivering on these expectations would be highly beneficial for the next government.