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Which Party is Best for Business? How the Election Will Affect SMEs

person wondering which part is best for business using a ballot boxThere are few people as acutely affected by the result of a general election than business owners. Not only do they face the same changes that other citizens are subject to, but they’re also responsible for another separate entity that has to navigate a different set of laws and regulations altogether.

As such, business and economics are often one of the main focuses of party manifestos. However, with so much noise and conflicting claims to digest, it can be difficult to know exactly what each party are proposing.

Because of this, we’ve pulled together each manifesto’s main business policies in an effort to distil the potential impact that each party could have on SMEs nationwide.

Labour

Labour have been keen to market themselves as a party focused on business for this election and have included several policies in their manifesto designed to appeal to business owners. Several of the policies seem to be geared around alternative energy sources. It seems that Labour see investment in sources such as nuclear, hydrogen, and marine energy as an opportunity to solve three problems at once: the overreliance on overseas fossil fuels, the net zero target, and the creation of more businesses and employment opportunities.

Great British Energy

SMEs with physical premises have had to endure some significant price hikes in their energy bills. Tapping into this issue, one of Labour’s main policies centres around the formation of a new nationalised Great British Energy company. This promises that “businesses will have lower bills for good”.

Identifying the need for an alternative to traditional methods after Russia’s invasion of Ukraine, they intend to “work with the private sector to double onshore wind, triple solar power, and quadruple offshore wind by 2030”. Further investments are also mentioned for carbon capture, hydrogen and marine energy industries.

National Wealth Fund

Investment in certain industries that Labour have identified as key will be funded by this £7.3 billion pot. They have already detailed how this will be broken down.

  • £1.8 billion to upgrade ports and build supply chains
  • £1.5 billion to new gigafactories (facilities for producing batteries for electric vehicles)
  • £2.5 billion to the steel industry
  • £1 billion to the carbon capture industry
  • £500 million to the green hydrogen industry
Corporation Tax and VAT

Labour pledge to cap Corporation Tax at its current rate of 25% for the entire parliamentary term. There also won’t be any rises on VAT.

Help for the high street

Hoping to make it easier for high street stores to compete with large online corporations, Labour pledge to replace the current business rates system. They claim that as it stands, our business rate system “disincentivises investment, creates uncertainty and places an undue burden on our high streets”.

Less surprises

Keen to “allow businesses to plan investments with confidence”, Labour have said they’ll only have one large fiscal event during Autumn each year. A business taxation roadmap covering the period of the next parliament will also be published. This will allow companies to see any upcoming changes due that may affect their plans.

Funding changes

SMEs have found it difficult to secure finance for growth over recent years, and Labour’s manifesto lists an intention to remedy this. Alongside this pledge, they also state that they will “scrap short funding cycles for key R&D institutions in favour of ten-year budgets that allow meaningful partnerships with industry”

Trading with the EU

Brexit remains a deeply divisive issue, and Labour seem careful not to nail their colours to one side or the other. Labour’s manifesto lays out their intention to stay outside of the EU but rebuild the UK’s relationship with it.

This entails work to “improve the UK’s trade and investment relationship with the EU” by removing barriers to trade they find unnecessary. No specifics have been mentioned here, but hey have, however, ruled out a return to the single market or customs union.

Conservatives

The Conservatives’ manifesto claims that they “will always be the party of business”. Throughout the manifesto the overriding message is for voters to “stick with the plan”, but they realise they have to provide something extra to sway voters while they continue to lag behind in opinion polls. Several tax cuts make up the headline policies within the document, with a handful affecting UK businesses.

Tax cut for self-employed workers

A proposal to abolish the main rate of National Insurance for self-employed workers is one of the Conservatives’ more eye-catching policies. They suggest that this would be done before the end of their parliamentary term.

Corporation tax

Like Labour, the Tories also pledge to not raise Corporation Tax.

In addition to this, the manifesto mentions that they will also “explore options” with the VAT threshold “to smooth the cliff edge of £90,000”.

Retain tax incentives

The Conservatives intend to keep a number of tax incentives in place with the intention of encouraging small business growth. Schemes they plan to keep include the Enterprise Investment Scheme, Seed Enterprise Investment Scheme, Venture Capital trusts, Business Asset Disposal Relief, Agricultural Property Relief and Business Relief.

Retain equal rights programmes

Programmes such as the Invest in Women Task Force and the Lilac Review will be retained to promote entrepreneurship among women and disabled people.

There’s also plans to work with both the British Business Bank and private sector fund managers to help female entrepreneurs with a £250 million Invest in Women Fund.

The return of National Service

Though not a business policy, the proposed reinstatement of National Service could affect many businesses that employ young people. £2.5 billion has been allocated to spend on implementing a mandatory National Service for all 18-year-olds.

While those drafted into year-long military service will be paid, these places will be limited and competitive. Everybody else will have to volunteer to work in a civic service for one weekend each month.

Businesses that rely on students for weekend work will be hoping for more details on whether They’ll be without staff some weeks, and who will pay their wages.

Less reporting

Now that the UK is outside of the European Union, the Conservatives plan to raise the threshold for employee counts to allow more companies to be classed as medium sized. They hope this might save one million hours of admin each year.

Shared policies

Surprisingly, both Labour and Conservative parties share several similar policies too. These include the rolling out of more gigabyte broadband and 5G mobile coverage, better access to finance for SMEs, more procurement opportunities for SMEs, and the improvement of the Prompt Payment Code to help SME cashflows.

Liberal Democrats

Ever since mention of a potential split from the European Union was first floated, the Liberal Democrats have positioned themselves as the pro-Europe party. As such, it’s little surprise that a handful of key policies in their manifesto are focused on mending relations between us and the continent.

Rejoining the single market

This is the big one. Switching back to the single market would make a massive splash on the economic landscape and would affect many UK businesses in the process.

This return to the single market would be the start of a series of changes that the Lib Dems hope would culminate in their long-term aim of returning to the EU.

Business rates

Similar to Labour, the Lib Dems have also spotted an issue with the current business rates system and plan to abolish it altogether. It would then be replaced with a commercial landowner’s levy.

Enhanced pay for zero-hours contracts

Trying to provide some sort of pay off for those on zero-hours contracts, the Liberal democrat manifesto suggests an enhanced pay structure to offset the lack of job security. This would mean a 20% higher minimum wage earned by zero-hours contracts, likely becoming a deterrent for employers handing them out.

They also plan to give zero hours employees a right to request a fixed hours contract after 12 months’ service.

Tackling tax evasion

HMRC would be given the resources needed to take tax-avoiding businesses to task.

Revision of excise duty

The Lib Dems have identified whisky as one of the UK’s biggest exports and aim to support the industry by reviewing the current excise duty structure.

Employee ownership

Listed businesses with more than 250 employees would have to give their staff a right to request shares in it under this policy.

Increase in Statutory Sick Pay

Their manifesto states a desire to align the rate of statutory sick pay with the National Minimum Wage. Payments would also be available from the first day absent rather than the fourth.

Perhaps pre-empting some concern about this, the manifesto also mentions that they plan to support “small employers with Statutory Sick Pay costs”, though the only support mentioned is through “consulting with them on the best way to do this”. As such, many business owners would likely hope for a little more information on this policy.

Reform Party

Nige Farage’s new party has marketed their manifesto as a contract between them and the public. Focusing mainly on policies linked to immigration and Brexit, Reform’s manifesto features less policies that affect businesses than some of the others, but still contain some eye-catching pledges. Their manifesto claims an aim to “back risk takers and wealth creators and make sure Britain is open for business”

Corporation Tax changes

Like Labour and the Conservatives, Reform have identified Corporation Tax as a topic to grab the attention of SME owners. Rather than capping the rate at 25%, however, they propose to drop it to 20% initially, and then 15% by the third year. A raising of the minimum profit threshold to £100k is also likely to appease directors.

Reform plans to fund these changes through a mixture of a 4% online delivery tax for large businesses, the scrapping of Britain’s net zero targets, and stopping paying interest on the £700bn worth of bonds at the Bank of England.

The Bank of England Governor, Andrew Bailey has already warned that such a change would cause the cost of borrowing for businesses to rise even further.

IR35 abolished

In an effort to secure the votes of Britain’s sole traders, Reform plan to abolish IR35 rules.

A raising of the VAT threshold

Plans to raise the VAT threshold to £150,000 have been pledged. This is with the intention of freeing “small entrepreneurs from red tape”

The scrapping of employment laws

Reform wants to remove thousands of laws that they believe are holding back UK businesses. Among these, employment laws will be targeted, allowing businesses to “hire and fire” more easily.

Extra public holidays

The manifesto features a recurring theme of upholding British values and its cultural identity. As part of this, the party plans to make both St George’s Day and St David’s Day public holidays.

Green Party

The Green Party’s concerns have always been chiefly environmental in nature, and their 2024 manifesto is no different. It features several policies that blend their environmental aims together with changes to the business landscape. This is part of their plan to build what they describe as a “green economy”.

A move to a greener economy

The Greens have earmarked £40bn each year to fund the change to a greener economy in the UK. It’s not immediately apparent how that annual £40bn would be allocated, however.

Carbon tax

It’s unclear whether this carbon tax will apply to fossil fuel companies or end users. Its implementation would have the dual purpose of funding a switch to greener energy sources and phasing out fossil fuel usage.

Help from local authorities

£2bn per year will be provided to local authorities to fund grants for decarbonisation. These would be handed out to businesses in the area to help overhaul their energy processes

Regional mutual banks formed

These regional mutual banks will be set up with the intention of helping to drive investment in decarbonisation.

Rise in the National Minimum Wage

Green policy dictates that the National Minimum Wage would be raised to £15 per hour, regardless of the employee’s age.

The manifesto explains that employers would be able to offset this thanks to a reduction in National Insurance payments.

Four-day working week

The introduction of a four-day working week is bound to be popular among employees, but perhaps less so among employers. Business owners will be looking for extra details on how this would be funded. Many companies would need to hire extra staff, and this could cause significant issues for some.

These are just a handful of the policies from each party. While each company owner will be looking at business policies with a keen eye, they should also take a look at those that will affect their personal lives. The sheer number of insolvencies recorded over the last few years has undoubtedly prompted political parties to look at the business landscape more closely. Regardless of the result on election day, it looks to be an interesting next five years for UK businesses.

For those that need help right now, Forbes Burton have a range of solutions to support UK businesses to grow or recover. Call us on 0800 975 0380 or email [email protected] for a free consultation to find out how we can help your company.

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