Small businesses applaud Labour’s good intentions, but the policies are doomed

Written by: Rachel Miller

Date: 5 July 2024

The UK public have elected a new Labour government to lead parliament

Labour’s election victory: Small businesses applaud Labour’s good intentions, but the policies are doomed.

Responding to the election result, Rory MccGwire, founder of the UK’s largest small business advice website Start Up Donut, said:

"After 14 years in which the government soundbites about supporting small businesses were rarely matched by actual support for those businesses, I think the Labour victory is seen as a chance for real change and improvement.

"But how will the incoming government’s promised policy changes affect the 99 per cent of UK businesses classed as ‘micro’ or ‘small’?

"In reality, these policies will have remarkably little impact. Why? Because we have seen these plans and promises many times before, in one guise or another. And yet, successive governments have failed to make a positive impact on the lives of the UK's smallest businesses.

"Let’s look at the three main new policies aimed at helping small businesses.

"Firstly, business rates. These have been discussed endlessly. I lost count of the number of consultations and reviews long ago. Pointing out the current flaws and problems is easy, but achieving a satisfactory solution is another matter entirely.

"Secondly, the national investment bank. There's no shortage of banks wanting to lend to small businesses. The real problem is that lending to small businesses is high risk. The well-known solution is for the government to underwrite the lending with some kind of guarantee (such as the Loan Guarantee Scheme and its successor schemes) and for the government to offer an ‘enterprise allowance’ grant to anyone brave enough to try starting a new business.

"Thirdly, the promise of more public sector work being awarded to small businesses has been made endlessly and such schemes have a lousy track record. The reality is that submitting a tender is a time-consuming and costly process for small businesses - with no guarantee of success. And often, those that are successful end up making a loss anyway because they have to undercut others to win the contract.

"The fact is that politicians and policymakers simply do not understand what is involved in running a small business. There are so many ways that life could be made easier.

"So, we have another party in power and another set of changes. What most small business owners want is for politicians to stop moving the goalposts so that they can get on with employing people and running their businesses."

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