What do the political parties have in store for SMEs?

As election fever (as well as volcanic dust) sweeps the country, we have had a look at the manifestos of the 3 major parties to see what they promise to do for small and medium businesses.

Our view is that real steps need to be taken to support SMEs through the recession and recovery process, and that means taking measures to help SMEs get the finance they need at a reasonable price, reduce regulation and red tape, and reform the tax system. Big businesses certainly seem to be siding with the Conservatives, as you might expect, but who do you think is most likely to deliver for SMEs?

Labour

• Increasing investment through a UK Finance for Growth Scheme. This will focus on SMEs who need to borrow between £2 million and £10 million or are in the high tech industries. 
• Setting lending targets for the banks in which the state has an interest. 
• Increasing capital allowances to encourage investment. 
• Continuing with the Time to Pay Scheme for tax and National Insurance. 
• Allowing small businesses to opt for a 1-year holiday on business rates. 
• Increasing Entrepreneurs Relief to a lifetime limit of £2 million. 
• Creating a Small Business Credit Adjudicator to ensure SMEs are not turned down unfairly when applying for bank finance. 
• Simplifying regulation and avoiding unnecessary red tape.

Conservatives

• For the 1st 2 years of a conservative government, removing employers’ National Insurance for a business’s first 10 employees for its first year. 
• Making small business rates relief automatic. 
• Putting 25% of State research and procurement contracts out to SMEs. 
• Creating a Work for Yourself program to give unemployed people access to business mentors and substantial loans to start new businesses. 
• Reducing marginal tax rates for those returning to work. 
• Reducing red tape by introducing a “one in one out” policy whereby, if a department introduces new regulation, it must abolish at least as much existing regulation. 
• Creating more diverse sources of affordable credit through a National Loan Guarantee Scheme. 
• Improving Research & Development Tax Credits to focus on high tech companies, small businesses and start-ups.

Liberal Democrats 

• Insisting that taxpayers’ representatives sit on the boards of banks to increase bank lending to viable businesses on fair terms. 
• Supporting Local Enterprise Funds to encourage a source of finance at a local level. 
• Reducing red tape by introducing a “one in one out” policy and sunset clauses (whereby regulations only last for a certain amount of time unless actively renewed). 
• Reforming business rates so they will be based on site values rather than rental values. 
• Making Small Business Rates Relief automatic. 
• Creating an Enterprise Fund to offer training, mentoring, and small grants and loans to help creative businesses get off the ground.

Of course, the most important thing that SMEs need is a real and sustained improvement in the economy and it’s difficult to judge which party will best lay the foundations for this. Only time will tell.

Gary Cousins
Business law solicitor