SMEs back change in government but remain unconvinced by Labour

02 October 2023 Consultancy.uk
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Small and mid-sized businesses remain relatively unconvinced by mainstream political discourse; despite both the Labour and Conservative parties bending over backwards for their support. As the UK prepares for a general election in 2024, a 40% portion of firms either do not know which party best serves their needs, or would back a third party.

Small and mid-sized businesses are eternal recipients of political hype. Commonly referred to as the “motor” behind job growth and economic prosperity, often without either claim being particularly thoroughly evidenced, mainstream politicians have spent decades trying to woo the SME entrepreneurs among the electorate – often at the expense of other demographics – with the promise of tax cuts, state incentives, and laissez-faire regulations.

In that context, it might come as little surprise that SMEs appear to be “shifting to the left” as the next election approaches. Labour’s incumbent leader Keir Starmer having made a concerted effort to shift his party to the right, and distance himself from the more transformative socialist policies of his predecessor, Jeremy Corbyn. With the party’s the return to old New Labour tactics, pledges have included ruling out higher income and corporation taxes, as well as talk of giving SMEs grants to help them meet the challenges of net zero – all making it plain that Starmer’s leadership is not interested in rocking the boat in a way that turned many SMEs off of the party’s 2019 manifesto.

SMEs back change in government but remain unconvinced by Labour

Broadly, Labour strategists will say that this is working. A new study from SME funder Bibby Financial Services has found that 33% of SMEs it polled now believe Labour best serves their needs – ahead of 26% which stuck with the Conservative government. But considering the Conservative Party is consistently around 20 points behind in wider polls for the next general election, that is less of a ringing endorsement than it might initially appear.

Indeed, more SMEs either do not know which political party best suits them, or back a third party, than identify with Labour. Of the 40% to say as much, 18% would plump for a smaller political party (including 5% for the Liberal Democrats and 4% for the Greens) to champion their needs in Parliament, while 22% are simply undecided. This may partially be connected to SMEs ultimate desire for stability – something the Labour Party does not seem to convince on, given how readily its leadership has reneged on its own flagship policies in the last year alone.

Ahead of next year’s general election, Bibby Financial Services found that economic growth and job creation was most important to 71% of SMEs – ahead of tax policies and incentives for 68%, and access to affordable financing and loans for 46% of respondents. Many firms generally see economic growth as hinging on certainty – of knowing what kind of playing field they will be operating on for an extended period of time, so that they can plan to make the most of those conditions – and a Prime Minister who says one thing in the morning, and another by the evening, might not be trusted to deliver on that front.

Still, SMEs are happy to talk up specific measures or reforms that the next government could make in 2024. Predictably perhaps, 65% made tax incentives the most popular policy, followed by access to low interest loans or grants for business expansion and job creation at 57%. Post Brexit, 29% of SMEs told Bibby Financial Services they would also like to see streamlined and simplified regulatory processes put in place, to help navigate compliance requirements.

Summarising the findings, Bibby Financial Services’ Chief Financial Officer Theo Chatha said, “Since the last General Election, small businesses have faced myriad challenges. Confidence in central government to manage the economy effectively is low, but this research indicates that SMEs feel abandoned by politicians, in general. What they desperately want from whichever party wins the next general election are policies and action that reflect that government’s genuine belief in the value that SMEs deliver to the UK economy overall. That means, greater economic stability and certainty, a more favourable fiscal environment and much better access to sources of finance, so they can properly plan for growth.”

Bibby Financial Services’ study is based on a poll of 500 UK SME owners and decision makers across the manufacturing, construction, wholesale, transport and services sectors. Respondents were businesses with a turnover of up to £25 million and a headcount of up to 250, from England’s North West, North East, Yorkshire, West Midlands, East Midlands, East Anglia, South West, South East, London, as well as Scotland and Wales. The poll did not include Northern Ireland.