Business Review February 2019
COST OF ‘GOVERNMENT POLICY’ RISING
New research has found that the cost of government policy to the small business community has risen sharply during the past six years, with an average small firm now spending 15% more on tax and employment obligations than in 2011.
The analysis, based on data from the latest Impact of Government Policy Index (IGPI) – which is jointly compiled by the Federation of Small businesses (FSB) and the Centre for Economics and Business Research (CEBR) – found that the increase is attributed to small businesses having to comply with a range of government policies, including business rates, auto-enrolment and Insurance Premium Tax.
And the FSB has warned that a range of government policies is set to see the cost burden on small firms rise further over the coming months. FSB National Chairman Mike Cherry commented:
“Come the beginning of April, small firms will not only have Brexit day to worry about but also Making Tax Digital, a higher living wage, rising employer auto-enrolment contributions and further business rates hikes. This will be a flashpoint for a lot of businesses, one which could threaten the futures of many. With Brexit on the horizon, it’s critical that government at all levels does its upmost to help, rather than hinder, the UK small business owners who are being tempted to other shores.”
NEW BUSINESS RATES INQUIRY LAUNCHED
The Treasury Committee has announced details of a new inquiry into the Business Rate system that will assess the full impact of this area of government policy on the business sector.
Details of the impact of the Business Rates inquiry were released on 1 February and are set to cover three areas. The first focuses specifically on the impact of changes in Business Rates policy since 2017 and will include analysis of the new reliefs and allowances, the ability of businesses to pay and the relationship between Business Rates and the behaviours it drives in business.
The inquiry will also assess how the Business Rate system measures up as a ‘good’ tax policy in terms of whether it is fair, supports growth and encourages competition, provides certainty and is coherent. Finally, the inquiry will assess the economic justification for, and problems associated with, property-based business taxes, and also assess potential alternatives such as the proposed digital services tax.
At the end of the inquiry, the Treasury Committee will make a series of recommendations to government on the fairness and effectiveness of the current system and how it could be improved. The initial deadline for written submissions is 2 April 2019.
The business community has broadly welcomed the announcement which, it is hoped, could ultimately lead to a fairer Business Rate system that balances the need to fund public services without overburdening the business community.
CBI RECOMMENDS APPRENTICESHIP REFORMS
A report by the Confederation of British Industry (CBI) has outlined a series of recommendations to reform England’s apprenticeship system.
The report states the government must make it clear that the Institute for Apprenticeships (IfA) is the principal body for vocational skills in England and ensure that it has the ‘independence and clout it needs’ to reform the system.
Other key recommendations in the report include: the speeding up of the apprenticeship standards approval process, so that businesses can start to use them; clarifying the position of T-levels
and higher T-levels within the skills system to foster higher levels of confidence in them amongst employers and the public; and increasing the time employers have to spend their money, where apprenticeship standards remain in development.
John Cope, Head of Education and Skills Policy at the CBI, said: “This business-backed blueprint needs to be taken seriously to make sure the English skills system supports, rather than frustrates, employers, offering a first step to people in their career.”
THE RISE OF THE ‘SIDE HUSTLER’
A recent BBC report has highlighted the rising number of workers who run at least one other business alongside their main source of income.
According to Henley Business School, one in four workers run at least one‘side hustle’, with 25 to 34-year olds the most likely age group to be involved. The business school estimates that 20% of an average side hustler’s income comes from their second job, equating collectively to a colossal £72bn or 3.6% of GDP.
While a second job can obviously contribute vital income, the research suggests that almost three-quarters of those who start a side hustle are following a passion, often in creative industries, or exploring a new challenge.
Having one or more extra jobs can provide a stimulating lifestyle, giving workers the opportunity to earn extra much-needed cash while indulging their interests and passions. However, there can be downsides to this lifestyle, such as long working hours and a lack of income security.
A poll by software company CIPHR suggests there may be downsides for others too. Just under two-thirds of workers with a side hustle claimed they work on their sideline during office ours, and 46% admitted failing to declare their secondary income to HMRC.
MINISTERS REJECT CALLS TO REGULATE COMMERCIAL LENDING
The government has refused to heed calls by the Treasury Committee to regulate small business lending, despite growing concerns that a lack of regulation could lead to further financial scandals.
Unlike mortgage lenders and consumer credit providers, an entity lending money to businesses does not need to be authorised by the Financial Conduct Authority (FCA). And, in a eport published last October, the Treasury Committee called for this anomaly to be addressed.
However, in its response to those recommendations the government insisted there is no clear case or regulation and suggested that such action would raise costs for lenders that would simply be passed on to the businesses themselves. It also added that lenders were already signed up to a code of conduct for best practice and that bank behaviour had ‘changed significantly’ since the 2008 financial crisis.
The government’s refusal to act was condemned by the Treasury committee’s chair, Nicky Morgan, who reiterated calls for the FCA to be given powers to protect SMEs. She went on to suggest that the government’s continuing refusal to act could set the scene or further financial scandals.
There was also criticism from the SME Alliance, which represents business banking victims. Nikki Turner, director of the SME Alliance commented: “The government and the FCA are betraying British businesses because they are unwilling to take on the big banks. The idea that because the banks are not behaving as badly as they did a decade ago t’s all OK is like inviting Hannibal Lecter to dinner because he hasn’t killed anyone recently.”
SHARED OFFICE PROVIDERS SEE PROPERTY VALUE SURGE
New data released by real estate law firm Boodle Hatfield has shown a sharp increase in the value of property owned by shared office providers.
The value of property owned by the industry’s op en providers rose by 35% last year, reflecting the strong growth experienced in the flexible workspace market. The data also highlighted an increase in demand for shorter leases amongst major companies – the length of the average commercial property lease fell from 25 years in 1987 to just 7.1 years in 2017.
The strength of the flexible workspace market and increased demand for shorter leases has encouraged traditional property heavyweights such as Great Portland Estates and Landsec to enter the market.
Simon Williams, partner at Boodle Hatfield, commented: Shared workspaces have now gone beyond being a cool place for media and tech startups – they are now a substantial part of the commercial property market in major cities worldwide. The expectation is that there is still significant growth in this market in the coming years.”
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