It’s been a tough few years for the UK’s SME sector. After the unprecedented disruption of the COVID-19 pandemic, small businesses have had to cope with further upheavals caused by Brexit and the war in Ukraine.
An estimated three million small businesses suffered combined losses of £1.9bn last year due to supply chain delays. High inflation, especially in fuel and energy costs, has eroded already thin margins for many SMEs, while the increase in interest rates aimed at controlling inflation has pushed up the cost of borrowing to levels not seen for over a decade.
No doubt with one eye on an election later this year – UK SMEs employ or support some 27 million people, roughly half of the electorate – the government has launched a PR blitz aimed at throwing a supporting arm around the shoulders of small business operators.
Yet not for the first time, small business owners would be forgiven for asking – where’s the substance? The initiative consists of a revamped Help to Grow ‘campaign’ – a self-help website flagging various resources for SMEs.
Heavy on ‘how-to’ articles and tutorials, the most tangible thing included is the Help to Grow Management Course, a 12-week programme aimed at developing leadership skills. It’s being part-funded by the government. But it still costs SMEs £750 per person.
The new website and course will be followed by the launch of a new Small Business Council in March. Details are thin on the ground as yet, but the claim is that the council will “bring together SME leaders from across the country” and ensure “SMEs have a clear voice at the table.”
SME owners will be forgiven once again for feeling they’ve heard it all before. The creation of the Office of the Small Business Commissioner in 2016 was intended to tackle some of the most pressing issues facing small operators, especially around late payments. Eight years on, it’s hard to see that much has changed.
Tackling barriers to growth
So what would SMEs REALLY like to see by way of support from the government in these testing times?
Finally getting to grips with late payments would be a good start. According to recent research by NatWest Bank, a third of all invoices issued by UK small businesses are not paid on time, with a quarter of SMEs owed between £5,000 and £20,000 at any one time. The majority of small businesses say the problem is getting worse, not better.
There should be little debate about this being an absolute priority is the government is genuine in its concerns for small business. Overdue payments create cash flow problems for SMEs, making it harder for them to pay their own bills. 41% of small businesses say they are worried about the threat of insolvency arising from late payments.
Chasing unpaid invoices also impacts productivity, with time and resources having to be diverted from core activity. It has been suggested that better enforcement of payment rules could boost the economy by £2.5bn.
The Federation of Small Businesses (FSB) has campaigned hard to argue for the inadequacy of the government’s response to ‘late payment culture’, and setting out why it matters for both SMEs and the wider economy.
The FSB has also called for reforms in banking practices that would make credit more accessible for SMEs. In particular, it has launched a ‘super complaint’ to the Financial Conduct Authority (FCA) over what it claims are ‘excessive’ demands for personal guarantees being made by banks before agreeing business loans.
Credit is essential in helping small businesses invest in growth. Barriers to borrowing can therefore create a significant drag on the whole economy.
Finally, most SME owners would surely agree that the current tax administration system, based as it is on a model introduced more than 50 years ago, no longer reflects the modern economic landscape. The government certainly agrees, as it has made its ‘Making Tax Digital’ reforms a cornerstone of tax policy.
But repeated delays mean SMEs are still having to navigate a hodge-podge of systems for submitting tax returns and making payments, with no clear roadmap as yet outlining when digitisation might be complete, and what businesses will have to do to prepare for it.
Whether it’s with tax, investment, credit control or anything else, the five million-plus small businesses operating in the UK deserve concrete, meaningful assistance in financial matters to help them realise their ambitions. At Xeinadin, our small business experts specialise in helping SMEs thrive with a full suite of accounting and advisory services tailored to their needs.
