UK government must “think again” about small business plan

Business and Trade Committee says government response fails to address tax, energy, procurement and crime pressures facing firms

Ministers were yesterday told to rethink their plan for Britain’s small businesses after MPs accused the government of failing to address rising costs hitting firms across the UK.

The Business and Trade Committee said the government’s response to its proposals for small business growth was “inadequate” and relied too heavily on existing schemes.

The committee said the Department for Business and Trade had fully accepted only six of 36 recommendations made after an inquiry into the pressures facing small and medium-sized businesses.

It has asked the department to return within two months with stronger proposals on procurement, tax, energy costs, business crime, bogus self-employment and protections for franchisees.

The call comes ahead of an appearance by Business Secretary Peter Kyle before the committee today.

In a report published in February, MPs warned that small firms were facing cost pressures comparable to the pandemic, without the same level of emergency support.

The committee said small businesses were closing at a rate that threatened high streets and growth across the economy.

It said many firms had described the cumulative burden of government policy decisions made “with no regard for their combined impact on SMEs”.

MPs said Treasury ministers had failed to engage properly with recommendations on business rates, VAT and tax administration, leaving major problems “unaddressed”.

The committee cited research from Professor Ben Lockwood showing that a one percentage point reduction in the tax rate reduced the vacancy rate for eligible high street properties by five per cent.

Since the committee’s report was published, the Federation of Small Businesses has warned of a new “cost crunch”.

The committee said energy standing charges had risen by 40 per cent, business rates were expected to increase by 52 per cent over the next three years, and employers were also facing higher minimum wage and statutory sick pay costs.

Rt Hon Liam Byrne MP, chair of the Business and Trade Committee, said: “Small business is the backbone of Britain’s economy, but too many now feel they are carrying a burden that is becoming impossible to bear.

“When we published our report in February, we warned that many firms were facing cost pressures comparable to the pandemic. Since then, those pressures have only intensified.

“We welcome the Government’s willingness to listen in some areas but too often it is repeating existing announcements, not confronting the problems businesses told us about first hand.

“Growth begins with small business. If Britain is serious about growing the economy, reviving our high streets and creating good jobs, we need a bolder, more ambitious plan to help small firms invest, hire and thrive.

“That is why we are asking ministers to think again and come back with a response that rises to the challenge.”

READ MORE: Research highlights rise of ‘solopreneurs’ as technology reshapes small business ownership. Branch and Mastercard report finds experienced professionals are turning to independent work, supported by digital tools but constrained by gaps in financial access.

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