Britain has a new Government. After 14 years under Conservative leadership, Labour won the General Election on Thursday 4th July 2024 with a majority. Keir Starmer is now Prime Minister, with Rachel Reeves appointed Chancellor of the Exchequer.
Even before Labour entered Downing Street, the focus was on economic growth and investment in business. Their manifesto laid out their plans to deliver on this and, in her first speech as Chancellor, Reeves promised to keep these commitments.
Until Reeves delivers her first Budget, Labour’s manifesto points to what small businesses can expect from the new Government.
Here we look at how Labour plans to tackle the issues that matter most to small business in the UK, including rising costs, cash flow and the red tape that makes small business less competitive.
Business taxation
For now, there’s not much change when it comes to tax for business. Corporation tax will remain at 25 per cent, and Labour have committed to cap it at this current level for the whole parliament.
Permanent full expensing for capital investment remains in place, as well as the Annual Investment Allowance for small businesses. In addition, Labour have said they will give more clarity on what qualifies for allowances to improve investment decisions.
Within six months of being elected, Labour have said they will publish a roadmap for business taxation. This, along with their decision to hold just one fiscal event a year, is designed to help improve stability for business and help them plan ahead.
One area in which Labour has committed to making a change is with the business rates system. To make it fairer to bricks and mortar businesses, they plan to replace the current business rates system with a new system of business property taxation that will level the playing field between the high street and online giants.
Late payments
We know that managing cash flow is one of the biggest challenges for small business owners, made particularly difficult by the late payment of invoices.
News that the new Government plans to clamp down on late payments, by requiring large businesses to report on their payment practices, will be very welcome.
Rising energy costs
Rising costs have been a real issue for small business owners over the past several years. Chief among them is the hike in energy prices.
Key among Labour’s first steps for change is a pledge to tackle energy bills by imposing a windfall tax on oil and gas companies. The aim is to cut bills and improve energy security, resulting in long-term stability in this area.
Access to finance
As part of their commitment to revitalising the high street, Labour have said they will accelerate the rollout of banking hubs. This will give small businesses somewhere to deposit cash.
In addition, there are plans to reform the British Business Bank to make it easier for small- to medium-sized businesses to access the finance they need to grow.
Red tape for exports
Alongside the Federation of Small Businesses, Labour have said they will set up a Small Business Taskforce to look at removing barriers for export, and provide clear guidance for businesses wanting to export.
The plan is to find ways to work more efficiently with the EU to simplify the import and export process, which has become more complicated and costly since Brexit, resulting in disrupted supply chains and impacting small business profits in particular.
Lack of access to public contracts
Labour’s National Procurement Plan is designed to give smaller businesses a fair chance to access public contracts.
Prior to the election, Labour identified £30 billion worth of public contracts that would be suitable for small businesses to deliver.
The aim is to cut red tape and streamline the bidding process to make it easier for small businesses to compete. Labour also said that it will be a requirement that at least one small business makes the shortlist when suitable contracts go out to tender.
Skills and training
Hoping to tackle the skills gap, Labour has said they will change the Apprenticeship Levy to the new Growth and Skills Levy.
Businesses will be permitted to spend up to 50 per cent of their levy contributions on non-apprenticeship training.
This will allow employers to choose from a wider selection of approved courses, giving them more flexibility over how they train their apprentices.
While businesses will have to wait for Reeves’ first Budget later in the year to know for sure how the new Government will proceed, there is much in Labour’s manifesto to reassure business and encourage investment.
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25/07/24: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.