Why the Government need to make UK Small Business a Priority
The famous old saying that ‘small businesses are the backbone of this country’ has never been more true than it is today. Currently there are over 5.5 million businesses registered in the UK, with the vast majority of those being small business and sole traders.
When we think of business, we often think of the giant multinational corporations that seem to dominate the news. However, when you look closer it is actually the thousands of small businesses that employ a small handful of staff, or the solo entrepreneur that contribute the most value to the British economy.
Small business = hard work
When faced with the choice between self employment or becoming an employee, many will chose employment because the small business world can be a very tough place to be. In fact, very many entrepreneurs who took the plunge into self-employment eventually went back to being an employee simply because they found it too hard to establish and maintain business cash flows, attract and keep new customers while trying to undercut their competition.
The idea of being your own boss is a wonderful thought. However, the security of regular employment with a consistent wage, paid sickness and holiday leave, and the peace of mind that you only need to do one job rather than constantly having to self-market, balance books and deal with accounts and taxes can be more appealing.
Starting up a small business is not a ‘get-rich-quick’ scheme. In fact most small business company directors get by on a very small salary, with often very small dividend payments on top. Sometimes is the only way to make ends meet and helps to keep the business going. The government also made it harder for small business owners when the former Chancellor George Osbourne added a 7.5% tax on dividend payments.
This was followed up with even more difficulty when Philip Hammond suggested the rise in NIC payments for the self-employed – a controversial suggestion that was swiftly followed by a U-turn when there was a public outcry in response to his suggestion.
So in recent years it seems like very few new government policies put forward have actually been small business friendly. Indeed, with the constant cuts to corporation tax, it does seem as if any new new changes have been targeted specifically towards larger corporations rather than at the ‘little guys’ that make up the vast majority of businesses in the UK today.
Levelling the playing field
Before the last election, Jeremy Corbyn made a suggestion that small businesses should have a level playing field with regards to holiday, sickness and other benefits. Most small business owners, especially sole traders and single entrepreneurs, can be especially harshly impacted by a period of sickness or maternity leave when they are a sole operator of a company or only employ a few people.
Cash flow problems are something that small businesses encounter more often, especially if they are dealing with larger businesses or corporations where late payments are common. This can leave the business – and the owners – running on little to no income for periods of time. The government have recognised this issue, and have taken a small step towards encouraging big businesses to pay up on time, but unfortunately, many still fail to respond in time at great cost to the smaller operator.
Balancing work and family life
Family and childcare responsibilities can also impact on a sole trader, especially if you are a mother trying to juggle the demands of your family with the responsibilities of running a business. All this despite the positive sound bites coming from government circles about supporting more female business leaders and women entrepreneurs.
Many small business owners look for reassurance from the government that they carry their best interests at heart, however it seems currently that the needs of the big corporations are taking priority. The government need to recognise that many small businesses are run very differently to the more mainstream corporations that they are used to dealing with. New start-ups in particular are being set up to run on a basis that focusses on lifestyle rather than in pursuit of crude profit.
Many thousands of small businesses have been set up to work flexibly around the needs of children and family rather than aiming to stockpile millions of pounds in a bank account. People are wanting to make a positive change to their local communities where they live and work. They want to make a significant contribution to society while striking a balance with the other important things in their life.
Changing government mindsets
For the government to truly get behind and support the millions of small businesses across the UK, they really need to change their mindset. The biggest stumbling block to this is the fact that large corporations generate anything in the region of £150 billion pounds a year, so the corporation tax generation potential is huge. This is why many politicians can only see the big fish rather than the millions of little fish swimming around the sea.
With more large corporations offshoring their wealth to tax havens each year, maybe it is time for the government to look inward at the vast potential that small business owners can offer. OK, these businesses will generate a relatively modest sum of corporation tax when compared to big business, but if they could look past these figures to see the vast social value of small businesses, they will see that they far out-value their tax generating capabilities.
With Brexit still very much on the forefront of the governments mind, looking inwards at what small businesses are already doing to support the economy, they may now be forced to back more small operations to become the thriving modern workforce that they have the potential to achieve.