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Small businesses are a key target of Labour business manifesto

A host of measures to support small businesses are broadly welcomed but industry warns against future corporation tax rises.

This week’s publication of Labour’s business manifesto “A Better Plan for Business” outlines a raft of promises from Labour as it seeks to win the business vote. Cutting and freezing business rates on the properties of over 1.5 million small firms, introducing a Small Business Administration to increase SME influence in government procurement and measures to increase access to finance are all described in the plans.

“ACE is glad to see the Labour Party is planning on introducing as many measures, almost two dozen, as it is in support of business, particularly for SMEs,” says Peter Campbell, policy manager, ACE. “For instance, a British Investment Bank, an idea first proposed by ACE in 2012, could help unlock finance and enable smaller companies to grow.”

However news that the party would reverse the April 2015 corporation tax cut, which sees tax on large firms with annual profits over £300,000 per annum fall from 21% to 20%, was less popular.

Although the manifesto promises to “maintain the most competitive corporation tax rate in the G7,” it gives no details of what this means for future rates. Data from accountancy firm KPMG shows that the UK’s tax rate of 20% is by far the most competitive of G7 economies with Canada the second lowest at 26% and the US the highest at 40%.

"If the Small Business Administration can grasp this nettle and bring meaningful change then it’s an initiative to be applauded. But make no bones about it it’s a herculean challenge” -Steve Wooler, BWB

Under the Conservative/Liberal Democrat coalition government corporate tax for large firms has fallen from 28% in 2010 to 20% as of 1st April 2015 putting it equal to G20 nations of Russia, Saudi Arabia and Turkey. “The UK has the most competitive corporate tax rate in the G20, so to attract more international investment to the UK and boost jobs, the next government should commit to maintaining this, and not to increasing corporation tax,” said John Cridland, director general of the CBI.

Tackling late payment was also in the manifesto with stronger requirements for larger firms to report on their record of late payment including actions to compensate their suppliers. Data from ACE Benchmarking Survey published in November 2014 revealed that SMEs wait an average of 81.5 days to get paid compared to 79.5 days for larger companies, compared to an industry target of 30 days.

“Tackling late payment will mean much to those same businesses, where cash flow is very often the key factor in whether they are able to continue operating,” says Campbell.

Establishment of a Small Business Administration “to ensure a voice for small business at the heart of government” and also to ensure that procurement contracts are accessible and regulations are designed with small firms in mind,  was met with some scepticism.

“There are many companies like ours in the SME category who can provide the expertise that very large companies provide, particularly in the infrastructure planning and design sphere,” says Steve Wooler, managing director of consultant BWB.

"A British Investment Bank, an idea first proposed by ACE in 2012, could help unlock finance and enable smaller companies to grow." - Peter Campbell, ACE

But he says that small firms are precluded from taking a leading role because the bureaucracy in the procurement system is an unbreachable barrier. “Technically strong, commercially astute and innovative operators are surely an important component of any drive to make Britain, and public procurement, much more efficient by getting a better return on its investment. If the SBA can grasp this nettle and bring meaningful change then it’s an initiative to be applauded. But make no bones about it it’s a herculean challenge.”

A new “gold standard” technical baccalaureate for 16 to 18 year olds was also proposed in the Labour business manifesto along with the requirement to study maths and English until the age of 18. But ACE warned that this should not be at the expense of existing schemes. “There is much good work already being done out there, for instance through the ACE-supported Technician Apprenticeship Consortium. We would encourage Labour to ensure good, existing schemes such as these are incorporated into their plans and not abandoned as new regulations are not flexible enough to recognise their value and allow them to continue,” ACE said.