The Government must take these five steps to support small businesses in the Budget, says EMMA JONES

While Labor has only been in government for just over 100 days, it is crucial that the Chancellor prioritizes supporting the backbone of our economy – small businesses in the next Budget.

Small businesses play a crucial role in the UK economy, driving job creation, innovation and economic growth.

However, they often face disproportionate challenges, including access to finance, with many small businesses struggling to secure loans or investment.

The cost of doing business continues to rise; from rent and energy bills to salaries and taxes.

Additionally, the digital divide can limit opportunities for small businesses to reach new customers and grow online.

During the election campaign, Labor made numerous high-profile promises. Now, small businesses are eager to see these promises translated into action.

Below are my five key recommendations for what the new Labor administration should do to support small businesses ahead of Rachel Reeves’ budget later this month.

1. A third of public contracts will be awarded to small businesses

Small businesses are increasingly struggling to get a foot on the ladder when it comes to landing government contracts.

If the Government set a clear target for the number of contracts it would award to small businesses, then it would already be taking a step in the right direction to level the playing field.

Businesses would be empowered to participate more effectively in the public sector supply chain, which could only further help the economy with the creation of more jobs.

Additionally, the Government should implement support programs that ensure they effectively comply with the upcoming Procurement Law and empower small businesses.

If the Labor Party chose to set out this recommendation, it would serve as a perfect benchmark for progress throughout its tenure in government, allowing policymakers and businesses to monitor their performance and hold them to account.

2. Reward companies for adopting technology

Enterprise Nation did some research and found that the UK offers some incentives, mostly tax-based for software expenses with a credit for the cost of developing software in-house.

While the financial benefits of these measures are often limited, they are also not tailored to the individual needs of businesses, instead following a one-size-fits-all approach, without broader support packages.

To overcome the above problems, the Government should resort to the successful Asian approach of financial and intellectual support in both Singapore and South Korea.

The Go Digital programme, used in Singapore, offers initial financial support as well as intellectual support tailored to each sector, allowing a business to receive the exact help it needs.

Whether a company is looking to hire a CTO as a service or receive grants for specific sectors, these are awarded based on the objectives of the country’s industrial strategy.

Meanwhile, in Seoul, the South Korean government is using its Digital New Deal to offer initial financial support of up to around 70 percent of the cost of technology tools to allow small businesses to transition to digital models.

These companies, like e-commerce solutions, can prosper thanks to the help of their government, which has allowed them to gain knowledge in a new field and expand their customers beyond those in the same city.

If Labor develops impactful financial support schemes inspired by those mentioned above, which are successful international initiatives, then the Government can get more small businesses to adopt technology, which would significantly boost the country’s productivity and help economic growth.

3. Do more to end late payments for the largest companies

Enterprise Nation recently conducted research that found that nearly half of all small businesses receive their payments late.

This puts enormous pressure on businesses’ cash flow, leading to stunted growth and limited expansions.

It damages their ability to operate week to week and also pay their suppliers, leading to a cruel trickle-down system where small businesses struggle to pay their suppliers without receiving the cash they are owed.

Ensuring businesses are paid on time for their time and effort is crucial and ultimately, if the Government removes this burden, it will allow them to focus on measures that allow them to grow.

The previous Government launched a review into the impact of late payments and found that payment times for some SMEs have been reduced over the last decade, but many businesses are left with unpaid invoices for too long.

Those missed payments could make the difference between a company thriving or struggling to keep its business in the black. Some companies do not survive the waiting times for payment.

Labor should take into account recent proposals from the European Commission which seek to introduce a single maximum payment period of 30 days for all commercial transactions, including B2B.

These proposals are made possible by the rise of electronic payment services over the last decade, allowing customers of many of the UK’s leading banks, including Barclays, HSBC, Lloyds and Monzo, to use real-time payment solutions.

4. Continue existing mentoring programs.

There’s no doubt that small businesses have fallen on hard times in recent years, but the green shoots of recovery and optimism are starting to appear.

If the Government is to provide a much-needed sense of continuity and stability to small businesses, Enterprise Nation is urging the Labor administration to take a cautious approach in dismantling support programs put in place by the Conservatives.

Enterprise Nation has been honored to be part of a consortium that offers the mentoring element of the Help to Grow program, which has made great strides over the past two years.

More than 7,000 mentors have been recruited and 3,000 have been trained to become mentors and enable small businesses to thrive.

To continue taking positive steps, Enterprise Nation would like to see the Government continue the mentoring program beyond March 2025 and collaborate outside of the specific Help to Grow programme.

5. Inquire about plans to eliminate and replace business rates.

The business rates system has long been a bone of contention for small businesses across the UK.

Labor argued in its general election manifesto that the current system “disincentivises investment, creates uncertainty and places an undue burden on our high streets”.

While some welcomed the news that the Labor Party was seeking to reform the business rates system to create a fairer form, it requires careful consideration and consultation to ensure small businesses are not disadvantaged.

An example would be any small business that has benefited from the Small Business Rates Relief (SBRR) which removes business rates on properties with a rateable value of £12,000 or less.

As many small businesses have benefited, particularly those employing up to 10 people, it is important that the Government clarify the specific details of this new system as soon as possible.

By doing so, the Labor administration will avoid unnecessary disruption and potential financial hardship for small businesses, as uncertainty can cost them dearly and impact investment decisions and hiring plans.

Any policy that results in a sudden tax increase for small businesses could have a significant impact and a “cliff edge” scenario could force the closure of these same employers that need to be protected.

Enterprise Nation would like to see the Government implement a thorough consultation process with small business owners and industry associations, as well as economic experts.

The goal should be to explore innovative approaches to business taxation that support the economic growth of small businesses.