A Closer Look for SMEs
As a small business focused on providing bookkeeping services to SMEs across the UK, we at Forest Bookkeeping always keep a close eye on political developments that could impact our clients. With the Labour Party now forming a new government following the 2024 general election, it’s worth examining their manifesto pledges to understand the potential implications for small businesses. While it’s still early days and specific policies remain to be fleshed out, here are some of the key proposals that caught our attention:
Tax Stability Labour have committed to no increases in National Insurance contributions, income tax rates, or VAT. This should provide some much-needed certainty for small business financial planning. The plan to cap Corporation Tax at 25% while allowing deductions for capital investments could also support SME growth.
Tackling the Skills Gap The proposal to replace the Apprenticeship Levy with a more flexible ‘Growth and Skills Levy’ is interesting. If designed well, it could give small businesses more control over workforce training and open up access to a wider talent pool. As accountants, we’re acutely aware of the challenges many SMEs face in finding skilled staff.
Strengthening Workers’ Rights Labour’s pledges to ban zero-hour contracts, outlaw ‘fire and rehire’ practices, and raise the minimum wage could have mixed effects. While improved job security and pay should boost employee morale and productivity, small businesses may face higher staffing costs. The devil will be in the detail of how these policies are implemented.
Boosting Regional Growth Plans to devolve more economic powers to local leaders and create regional employment hubs could open up new growth opportunities for SMEs in their local markets. Stable R&D tax credits and a new Regulatory Innovation Office might also benefit startups in technology and innovation-driven sectors.
Expanding Startup Funding Proposals to refocus the British Business Bank on supporting SMEs outside London and reform the EIS and SEIS schemes to better assist early-stage firms could make a real difference for startups seeking growth capital. As always, effective targeting of these initiatives will be key.
Prompt Payment Late payment remains a huge challenge for many of the small businesses we work with. Labour’s plans to toughen up reporting requirements for large company payment practices and ‘stamp out’ delayed payments could provide welcome relief – if they have teeth. Proper enforcement will be critical.
Reforming Business Rates The pledge to scrap the current business rates system and introduce a fairer alternative that helps high street firms compete with online giants is encouraging. For many small businesses, rates are a major overhead. However, the new system must genuinely reduce the tax burden on SMEs to have a positive impact.
Promoting Exports With Brexit disruptions still affecting importers and exporters, Labour’s aim to remove trade barriers and improve UK-EU cooperation could help SMEs operating internationally. The proof will be in the pudding, but any steps to cut red tape and costs for small business exporters are welcome.
Addressing Energy Costs After the recent energy bill crisis, plans to boost UK renewable energy, support manufacturers, and establish ‘Great British Energy’ to drive down costs will be music to the ears of energy-intensive small businesses. Again, effective implementation is everything.
Opening Up Public Procurement Finally, Labour’s National Procurement Plan to earmark £30bn of public contracts for SMEs and streamline the bidding process could create a wealth of new business opportunities for smaller suppliers. Simplifying the tendering process must be a priority.
While there are some encouraging signs for small businesses, the coming months will reveal whether the campaign rhetoric translates into concrete action. SMEs will need to keep a close eye on developments and seek guidance to navigate any changes. As always, we’re here to support our small business clients with expert financial advice as the political landscape shifts.
Of course, I must caveat that this analysis is necessarily speculative given my knowledge base. The actual policies and priorities of the incoming Labour government in 2024 remain to be seen. As your trusted bookkeeping partners, we’ll endeavour to keep you informed of the latest developments and what they mean for your business.
If you seek the assistance of a well-established business for your accounting and bookkeeping needs, reach out to Sean at Forest Bookkeeping by calling 01933 213223 or visit our contact page.