The economic landscape in the UK has been incredibly challenging in recent years, particularly for SMEs. These companies make up the business backbone of this nation and they are likely to be the driving force behind our recovery and any potential growth-based revival, ploughing more into local economies than large corporations, particularly those registered offshore.
Their undeniable contribution to economic recovery and expansion should not be underestimated. According to Government statistics, SMEs constitute 60% of the UK workforce and contribute 52% to the country’s GDP. They provide employment for 16.4 million people and generated a remarkable £2.1trn in turnover in 2022. Despite the Government’s claim to support and champion small businesses, the current administration has imposed hurdle after hurdle in the paths of many.
In 2020, the UK witnessed an unprecedented 47% increase in SME business failures compared to 2019, as reported by the Insolvency Service. This was a significant blow to the economy, despite Government support measures. Unfortunately, this trend has continued, exacerbated by an economic downturn, surging inflation, and looming loan repayments.
The situation did not improve. In the first quarter of 2022, there were 10,790 SME business failures in the UK, marking a 10% increase compared to the same period in 2021. These statistics underscore the urgent need for comprehensive support and policies that genuinely champion the vital SME sector in its economic recovery efforts.
The road to sustainable growth
Business owners have voiced their concerns about the absence of support, the weight of taxes, and the financial obstacles that hinder their progress. It is time that this Government wakes up and addresses these pressing failures overseen by the then Chancellor of the Exchequer and now Prime Minister. Is it not incumbent on this same person now running the Government and supposedly steering the nation, albeit a bit haphazardly, to formulate key policies that not only encourage long-term growth but also pave the way for sustainability?
Here are a few suggestions that could assist in turning this situation around:
- Easing the tax load and boosting incentives
Entrepreneurs yearn for a reprieve from tax burdens and seek financial incentives tailored to their unique needs. A judicious approach by the Government, offering tax breaks and incentives designed to allow small businesses to retain a larger portion of their profits is needed. Against this backdrop repealing the hugely damaging rise in corporation tax would be a welcome first step. - Facilitating access to affordable financing
The struggle to secure affordable financing for expansion is an ongoing battle for small businesses. Exorbitant interest rates and stringent loan requirements are discouraging, dampening aspirations to invest in growth. This has been further heightened by pandemic loans that need to be repaid. In other words, businesses find themselves caught in a financial quagmire.
A well-structured plan by the Government, offering specialised loan programs with favourable interest rates and more flexible repayment options, can potentially be a lifeline for small businesses in need of capital infusion. The level of interest rates makes business investment an unattainable dream. - Nurturing skills with targeted training
Investment in skills, the lifeblood of small businesses, has hit a multi-year low. A recent Federation of Small Businesses (FSB) report revealed that SMEs in the UK are investing the least in skills development now, compared to the last five years.
To empower businesses, foster innovation, and embrace technological advancements, a proactive Government approach is needed. Establishing robust training and development programs can equip SMEs with the tools to enhance employee skills. In turn, this will help them remain competitive and actively contribute to industry growth.
In today’s challenging market, attracting talent and promoting growth is no small feat, a challenge amplified by the impact of Brexit. However, targeted training initiatives have the potential to bridge the gap between untapped potential and achieving success. - Adapting apprenticeship initiatives
Apprenticeship programs are undoubtedly beneficial, yet they need to evolve to encompass a wider range of professions, including disciplines like marketing. The Government’s effort in adapting these programs to cater to professions beyond the conventional trades can provide a platform for small businesses in diverse sectors to harness apprenticeship potential. Apprenticeships matter, but their scope must broaden. - Easing the strain of business expenses
For brick-and-mortar businesses, overhead costs – rent, utilities, and other expenses – are immense and have small businesses teetering on the edge. A study by the National Federation of Independent Business (NFIB) found that 60% of small businesses are concerned about their ability to pay their rent. With soaring expenses, how can we grow?
The Government can help to ease the financial strain on small businesses by introducing relief measures or subsidies. The Government could provide rent relief to small businesses that are struggling to pay their rent. This could be done by providing grants or loans to businesses, or by negotiating with landlords to reduce rent payments. They could also provide utility relief to small businesses. This could be done by providing grants or loans to businesses, or by negotiating with utility companies to reduce utility bills.
The Government could also provide other subsidies to small businesses, such as subsidies for marketing or training. These subsidies could help businesses to reduce their overhead costs and focus on growth. Do we also encourage a return to the office to facilitate subsidies for those who contribute to the local economy whilst making travel for those commuting more affordable? - Embracing education and diverse talent
Investing in education and fostering diverse talent is pivotal for a thriving business environment. Eradicating tuition fees, increasing educational funding, and advocating for a rich mix of students pursuing higher education can lead to a skilled and diverse workforce, contributing significantly to small business expansion.
A vision for long-term regeneration
Yes, there would be a cost to pay to implement many of these measures, but the point is transient policies won’t cut it; we need a holistic, long-term strategy for business revival.
Consistent Government policies that alleviate tax burdens, address financing challenges, and prioritise workforce development can infuse stability and empower small businesses to envision sustainable growth. It’s time to focus on real issues, such as homelessness and education, to foster an economy that truly thrives. I realise it might be too much to hope for a cross-party consensus on this, but enlightened politicians should at least try, in the national interest, or face the prospect of a very real business decline for a generation.
Small businesses are the beating heart of our economy, and their success shapes the trajectory of our future. By championing policies that alleviate the hurdles faced by small businesses, the Government can cultivate an ecosystem that promotes innovation, encourages investment, and fuels job creation. The call to action is now, to pave the way for a future where small businesses stand tall, and our economy thrives.
To read the published article by Dan Todaro, Managing Director please visit Business Leader
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