Labour’s plans for small business
On the 29 November, the Labour Party published a nine point plan to support small business. What is Labour proposing? We take a closer look.
1. “Legislate to tackle late payments: Unlocking £20 billion in unpaid invoices”
According to official figures, small businesses typically have £20 billion of invoices outstanding at any one time. Labour would legislate to require the audit committees of big businesses to report on their company’s payment practices in the company annual report.
IoD comment: we agree that larger companies should oversee payment practices as a board level issue. As we have advocated, this is a responsibility that should be allocated to a board committee rather than an individual non-executive director. However, this kind of new board responsibility would be better implemented as a provision in the UK Corporate Governance Code rather than through legislation. We also recommend that Labour adopt our proposals to increase the transparency of payment practices, including publication of twice-yearly rankings of the speed at which large companies and public sector organisations pay supplier invoices, by volume and value.
2. “Scrap business rates: And replace it with a system that is fairer for bricks and mortar businesses”
Labour argues that bricks and mortar businesses are now paying disproportionately more in local taxation than their online competitors. Consequently, it would scrap the current business rates system and “replace it with a fully costed and fully funded system of business property taxation that is fit for the 21st century”. Labour haven’t yet provided details of what that new system would look like and “are continuing to develop these plans ahead of a general election”.
3. “Revitalise our high streets: Tackling anti-social behaviour and powers to take over empty shops”
Labour plans to tackle anti-social behaviour by introducing new town centre police patrols and mandatory antisocial behaviour police leads. It would create a new specific offence of assault against retail workers and encourage a police response even in low value cases. Labour would also give councils new powers to take over empty shops and reopen them without consent from the property’s owners.
4. “Boosting small business exports: Removing the barriers to export with clear information and support”
A Labour government would publish a trade strategy connected to its planned industrial strategy and foreign policy objectives and launch a Small Business Export Taskforce. The Trade and Cooperation Agreement with the EU comes up for renewal in 2025, and Labour plans to negotiate a sanitary and phytosanitary agreement to make it easier to move food products across the border. It also wants to negotiate improved recognition of professional standards and qualifications across Europe, to underpin trade in services.
5. “A new direction for skills: With Technical Excellence Colleges connected to local economic needs”
Labour will address skills shortages in England by creating a new coordinating body – Skills England. Another key initiative will be establishing Technical Excellence Colleges, which will engage with local small businesses. Businesses will also be involved in the development of Local Skills Improvement Plans. The current Apprenticeship Levy paid by larger businesses will be transformed into a new Growth and Skills Levy to give businesses greater flexibility in how they deploy the funds.
IoD comment: Labour’s plans to establish Skills England are aligned with our long-standing proposals for a fully independent Shortage Occupations Agency – with a statutory remit to systematically advise on current and future skills shortages areas. We would also like to see the government play a more active role in using the tax system to incentivise business training, for example by allowing expensing at over 100% for training in areas of future skills shortage.
6. “Get Britain building again: By speeding up the planning system and unblocking the grid”
Labour plans to reform the planning system and build 1.5 million homes over the Parliament, creating opportunities for small business. 300 new planners will be recruited across the public sector and a Future Systems Operator will work to enhance access to the energy transmission infrastructure for new energy providers.
7. “Make Britain a clean energy superpower: For cheaper bills and greater energy security”
According to government figures, UK electricity prices are 59% higher than the EU average, and this negatively affects the competitiveness of UK business. Labour’s Green Prosperity Plan would invest alongside the private sector in renewable energy, hydrogen, carbon capture and nuclear power. A national Warm Homes Plan would upgrade nineteen million homes to EPC standard C over a ten-year period.
IoD comment: As well as providing business with cleaner, cheaper energy sources, government also needs to consider how it can incentivise SMEs to reduce their carbon footprint. Two-thirds of IoD members say financial support or incentives from Government would be most useful in helping them to address climate change. Our research shows that the most effective way to spur change would be to have a lower corporation tax for organisations that have achieved net zero compared to those that have not.
8. “The best place to start up and scale up: With better access to finance and more spinouts from universities”
Labour would “unlock the supply of patient capital for technology-intensive, early-stage businesses”, although the plan does not provide detail on how it would do this. It would reform the British Business Bank so that it would better support SMEs and regional growth. Universities would be given a wider range of options on founder-track agreements to help encourage spinouts.
9. “A fair chance at public contracts: With guaranteed shortlisting for smaller firms”
A National Procurement Plan would give SMEs improved access to public contract bidding. At least one SME would have to be included in any shortlist when any suitable contract goes out to tender.