How the New Labour Government Could Impact Small Businesses

The recent election has ushered in a new era for the United Kingdom, with the Labour Party now in power. Small businesses, in particular, are paying close attention to the policies and strategies that the new government will implement. This blog will explore the potential ways in which the Labour party could impact small businesses and what they can expect in the coming years.

Keeping The Economy Steady And Secure

One of the Labour government’s cornerstone promises is to “kickstart economic growth”, a mission that is at the heart of its manifesto. Central to this mission is the idea of the government acting as a “strategic partner” to businesses. This partnership approach is designed to provide a stable policy environment encouraging investment and growth. This could mean more predictable and supportive conditions for expansion and innovation.

It is no secret that businesses need a stable environment to thrive.  So, keeping things steady and secure is vital.

Labour has promised to roll out a new industrial strategy that’s mission-driven and future-focused. This means they’re planning to look at the big picture and focus on long-term goals. By doing so, they aim to give businesses the confidence and certainty needed for effective planning. They also plan to simplify the rules in key areas, which should help boost productivity. A clear and predictable regulatory environment is crucial, and Labour’s plan to hold one major fiscal event each year, along with a roadmap outlining business taxes for the next few years, will help provide this clarity.

For Labour, sticking to their promise of careful financial management is key to maintaining stability. By controlling spending, they can help keep national debt from growing too much. If borrowing increases significantly, it could hurt the UK’s credit rating, making it more expensive for the government and businesses to borrow money. A lack of financial discipline could also worry the markets, which have already accounted for Labour’s promises. If Labour strays from these expectations, it could create uncertainty and disrupt stability.

Boost Business Investment Abilities

Many businesses struggle to improve efficiency. The main roadblock is a lack of funding, which makes it hard to invest in areas that could significantly boost productivity, like developing employee skills and enhancing wellbeing. Fortunately, a possible drop in interest rates later this year might ease some of this burden by lowering debt repayments, which would free up some extra cash for investment.

Labour’s proposed National Wealth Fund, which they have said they plan to fund with £7.3 billion over the next Parliament, could also help boost private sector investment. They aim to invest in key areas like ports and supply chains, gigafactories, the steel industry, carbon capture, and green hydrogen. These investments could open up new opportunities for your business to grow and innovate.

Taxation: Stability And Fairness

Taxation is always a critical issue for small businesses, and the Labour government has made several key commitments in this area. One of the most significant is the capping of corporation tax at 25%, coupled with the retention of full expensing. This means that businesses may be able to continue deducting the full cost of qualifying capital investments from their profits before tax. This could encourage further investment in growth and innovation, as the tax relief helps offset the costs of expanding operations.

However, there is some uncertainty regarding potential changes to capital gains tax and pension tax relief, as the government has yet to rule out adjustments in these areas. Business owners should stay informed about these developments which could impact long-term financial planning.

Innovation and Technology

The Labour government’s emphasis on innovation is clear, with the proposed establishment of a Regulatory Innovation Office. This new body aims to bridge existing regulatory functions across the government and accelerate approval timelines, particularly for technology companies. For small businesses in the tech sector, this could reduce the time and cost associated with bringing new products and services to market.

Additionally, R&D funding will be structured on ten-year budget cycles, allowing for more meaningful partnerships between government and industry. While details on support for university spinouts and startups remain sparse, the British Business Bank’s widening mandate to include regional growth could provide additional funding avenues for innovative businesses outside of London.

At Bells Accountants, we have a trusted partner who can assist with applying for and advising on R&D claims, ensuring that your business maximises the available opportunities. Whether you’re a small tech company or a larger enterprise, our partner can help you navigate the complexities of R&D funding and support.

Employment Law and Worker Rights

One of the Labour government’s most immediate and tangible impacts on small businesses will be changes to employment law. The party’s manifesto includes approximately 60 proposed changes, many of which were set to be implemented within the first 100 days of taking office. These include increasing the minimum wage, banning zero-hours contracts, ending the practice of fire and rehire, and introducing day-one rights for sick pay, parental leave, and unfair dismissal. These changes will require careful planning and potentially increased costs. Introducing a new enforcement body to ensure compliance with employment regulations means that businesses will need to stay up-to-date with the latest legal requirements to avoid penalties.

Addressing the Skills Gap

Labour’s approach to addressing the skills gap in the UK labour market includes creating a new public body, Skills England, and improving work experience opportunities for young people. The replacement of the apprenticeship levy with a growth and skills levy is also expected to better align training opportunities with the needs of businesses. This could mean greater access to a skilled workforce, particularly if the new systems prove more responsive to the needs of local employers. However, these initiatives’ success depends on their implementation and how much they genuinely meet the needs of small businesses.

Prepare Your Small Business for Changes: Contact Us

The Labour government’s policy agenda presents a mixed bag of opportunities and challenges for small businesses. It is essential to stay informed about the evolving policies and seek advice from financial and legal experts to ensure they are well-prepared for the changes ahead. With careful planning and strategic decision-making, small businesses can adapt to the new Labour government’s policies and thrive on the opportunities they present. Reach out to Bells Accountants and see how the proposed new policies could impact your business. Call us on 020 8468 1087 or email .