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Government ignore plight of small, medium sized businesses

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Government ignore plight of small, medium sized businesses

The Labour government ignores the plight of the so called small and medium sized businesses at their peril. Forgotten amongst the many problems facing the UK economy are the 3.6m SME’s, many of which are struggling to make ends meet and the government could do more, but choose not to.

Many SME businesses are bound in a mountain of red tape to do with tax, VAT, employment and paternity rules, health & safety issues and the many other headaches passed onto them by the government departments of this Labour administration. The vast majority of the people that work in these government departments haven’t got a clue as to the value these business owners add to the UK economy (some £1100bn per annum) and for that matter, couldn’t care less. Ask any business that exports products to the European Union. Because of the problems associated with ‘carousel fraud’, something that was very much related to the mobile phone industry, the VAT office now passes the burden for VAT checking onto the business owner. Often the VAT office will instruct the business owner to charge another European company VAT, the latter objects, the VAT office stands firm and the order is lost for ever.

Add to that the raft of existing and new health & safety rules. If the company employs more that 5 people, they are literally swamped with rules and regulations. The business owner now has a choice, they can ignore them at their peril, or employ a consultant, a full-time health & safety officer or digest the rules and do it themselves. Instead of driving the business forward, the business owner is expected to spend valuable time and resource on what can often be described as, unnecessary health & safety rules. Don’t get me wrong, some of these rules are necessary, but they have now become so burdensome that they are suffocating many small and medium sized businesses.

If that was not enough, what of business rates? These often account for some 50-55% of the lease or rental costs of the office, factory or industrial unit. Ask any business owner what he gets for his money and he will not be able to tell you. They are even charged, often 3 times as much as the cost of a private contractor, for collecting their waste. If they suffer from anti-social behaviour, vandalism or the like, they cannot get a police officer to investigate, because they are too busy with their own paperwork, instead, if they are lucky, they might get a visit from a well-meaning, but utterly useless Community Safety Officer.

On top of all that, tax breaks for small and medium sized businesses are virtually non-existent, removed, for the most part, by this Labour government. Therefore, you have to ask these business owners why they bother, it is probably because they are so far in, they cannot extract themselves without losing everything!

Apart from the red tape burdens, small businesses are invariably at the mercy of larger businesses. Many, especially when things are tough, or their year end is looming and they want to maximise their cash reserves, pay their invoices late. Some SME’s will tell you how they have to wait for 6 or 9 months to get paid by companies, that can, but won’t pay until they absolutely have to. More businesses fail as a result of poor cashflow that for virtually any other reason. You can have a sound business, but if you don’t get paid in a timely manner you are in trouble.

So, maybe they could consider factoring, this is one way, if expensive, that SME’s can get the cash they need to survive. But this is now becoming more and more difficult as the banks increase the criteria, raise the interest rates and reduce the amount of money available. In addition, banks are increasingly asking for more and more security, which can include a fixed and floating charge or some other form of personal surety.

New Labour in general and Gordon Brown in particular has made much of how “our policies” have allowed small and medium businesses to thrive. This is quite simply a lie. Business owners have set up their businesses and developed them in spite of the governments high taxation, red tape and indifference, not because of any initiative introduced by this government. SME’s have been very much on their own, but I suspect that many will feel, more than ever, the abandonment that is the New Labour policy towards the SME sector. I predict, that unless there is dramatic, sustained and immediate action by this government in relation to the SME sector, that more will go to the wall than at any other time in our history and the responsibility can be left firmly and squarely with Gordon Brown when he was chancellor and New Labour.

The government may need reminding that there are estimated to be some 3.8m SME’s in the UK, of which over 99% employ less than 50 people. Some 3.6m actually employ less than 10 people and a further 167,000 less than 50 people. Yet, the SME sector accounts for nearly 99% of all UK businesses, some 12.6m employees and an estimated contribution £1100bn or eleven Northern Rock’s. Many of these same companies are suffering and if their failure rates continue to rise, this will have a direct affect on unemployment and tax revenues. In terms of the latter, the government would do well to remember that many small businesses and SME’s do not have the benefit of fancy accountants looking at ways to reduce their corporation tax.

If just 10% of these businesses fail due to the continued indifference demonstrated by this government, there will be an increase of 1.3m unemployed. Quite apart from the personal affect on each and every one of these individuals, the government, via the taxpayer will have to support these people until they can find alternative employment, which will provide a further burden on the remaining taxpayers, plus the government will no longer benefit from employees tax, employees NI, employers NI, VAT and corporation tax.

For every business owner that suffers a business failure, you can fairly certain, that a good proportion of them will not try again and that means that some of these employment opportunities will be lost forever. Gordon Brown always likes to take the credit when things go well, even if he had nothing to do with it, it is now time he put something back and helped these businesses before it is too late.

Posted in General, Labour | Comments (2)

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