PROPOSED SME SUPPORT MUST PRIORITISE FAIRNESS, URGES MILSTED LANGDON
Released On 22nd Jul 2024
Leading independent South West accountancy firm, Milsted Langdon, has called for fairness and consideration for SMEs to form the core of the Government’s new SME support measures to facilitate business growth.
After its General Election win, the Labour Party has pledged to address the difficulties facing SMEs in its proposed policies, stating that it will take action over late payments to sole traders, make access to capital and Government contracts easier for SMEs and rule out a rise in Corporation Tax rates.
A welcome move for the business community though it is, says the firm, the issues posed by the size and access to capital of SMEs must be addressed with enhanced support that recognise a historical disadvantage.
Jon Stocker, General Practice Partner at Milsted Langdon, commented: “Any measures targeting SMEs will help, provided that they are properly and fairly implemented. However, experience unfortunately says that, when it does come to implementation, bureaucracy may well dilute the potential impact that could be achieved.
“There’s also the issue of recognising the difficulties that SMEs face which their larger counterparts do not.
“For example, on the topic of reducing the incidence of late payments to SMEs: there is already the Late Payment of Commercial Debts (Interest) Act that was introduced in 1998 that allows for a statutory interest rate of eight per cent over the base rate.
“However not many businesses are aware of this, and it is also difficult to enforce without sometimes destroying a trading relationship with an ongoing customer, especially if dealing with a much larger organisation that the SME is dependent upon due to the size of contract.
“If anything needs doing, it is to publicise the ability to enforce this, but you will always struggle with the relationship aspect as irrespective of the rules the threatening to withdraw a contract can be sufficient to make an SME back down.”
The firm pointed out a similar issue facing SMEs looking to access capital, which the Labour Party has committed to make easier.
In the firm’s view, the biggest barrier to capital access for SMEs is knowledge.
“There are substantial amounts of available capital that can be accessed in the South West,” continued Jon, “but there is a lack of knowledge on how to access this.”
“The whole system should be streamlined so that people have a more straightforward way of finding out what is available. There is still difficulty in accessing finance from the high street banks, who despite saying they are open to business, put the hurdles so high that people end up going to secondary lenders. “If, for example, the British Business Bank is able to be seen as a big player in the secondary market, then there is scope for this to work.
“Similarly with Government contracts, there needs to be a more open and equitable bidding process. At the moment, tendering for this type of work is extremely time-consuming and difficult. The forms dictate so many business requirements that SMEs struggle to comply with them.”
The commitment to freeze Corporation Tax rates, says the firm, is another positive step that still disproportionately impacts smaller businesses. Jon said: “There was one of the largest increases in Corporation Tax last year, so freezing rates means keeping them at higher rates.
“The limit of £50,000 profits for the lower rate of 19 per cent is far too low and should be raised, or else there should be greater incentives to retain the profits for further investment.
“To help with financial growth and planning, you require a stable economy, and anything introduced needs to be for the longer term rather than any short-term initiative.
"Most SMEs are looking for a three to five year payback on investment decisions and need to be able to see that there is a stable outlook. Whether we’ll see that remains to be confirmed.”
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