As the UK slowly claws its way out of recession, there is more chatter than ever about the importance of small businesses to economic prosperity.
If confirmation were needed that the UK government is finally waking up to the importance of SMEs it arrived in the form of the Small Business, Enterprise and Employment Act.
The bill, just passed into law, marks the first occasion that small business has been directly named in statute.
Yet is the bill that important for SMEs? Or is it simply a case of politicians jumping on a bandwagon as it hurtles towards election day?
Bill is a rallying call for SMEs
The potential power of small businesses is staggering. There are over 5 million SMEs in the UK – that’s nearly four times the number of members in UNITE, the UK’s largest trade union.
SMEs generate half of the UK’s GDP, employ over 15 million people (including 99.3 per cent of all private sector employment) and have a combined turnover of £1.6 trillion
Essentially the new bill is a very public acknowledgment that the government recognises the increasing contribution of SMEs to the UK economy – a reassuring ‘we’ve got your back’ message whispered into the ears of business voters heading into the polling booth.
Trapped for years by grim economic figures and the shackles of austerity, is it any wonder politicians are keen to get in on the action?
>See also: Don’t let big business call the shots
Yet many SME owners will feel they have succeeded in spite of, not due to government help. Furthermore, there seems to be a lack of depth in the bill and little clarity on how its provisions will be applied. As long as SMEs remain compliant with the bill’s new provisions, it will likely have minimal day-to-day impact.
Instead, what this legislation should do is make entrepreneurs sit up and take notice of just how important they are collectively to the UK economy. Traditionally small businesses, particularly the self-employed, have been quite isolated and lacking in representation. As a result politicians have never had to respond directly to what may be quite commonly held concerns.
But as social media and digital platforms help bring entrepreneurs from all over the country closer together, opportunities are growing exponentially for SMEs to coordinate their voices and make their ideas and concerns heard.
There is much common ground around the needs of small business owners across the political spectrum in which pressure could be brought to bear.
SMEs are the new black
As more people become entrepreneurs, politicians will have to drastically revaluate how they approach small business matters.
The increasing attractiveness (even necessity) for young people to go into business for themselves will only further grow the influence of SMEs – as will the younger generation’s more cohesive, coordinated approach to digital communication.
SME owners are less likely than many groups to vote alongside traditional party or regional boundaries, focusing instead more on business and finance issues that directly affect them.
There needs to be a genuine two-way dialogue between government and SMEs to produce practical, supportive legislation to improve the lot of small businesses -rather than mere cosmetic legislation.
Whilst traditional tactics such as joining local chambers of commerce and working with local bodies have their place, technology is making it easier for people to band together to discuss ideas and work as a collective when looking for change. Entrepreneurs should push on every door possible – physically and digitally; locally and nationally; traditional and new.
Matthew Hancock, Minister of State for Business and Enterprise, says the bill shows the government is backing SMEs ‘like never before’.
A more accurate perception may be that the government has never been more aware of how much it needs to get the backing of SMEs.
Time to think big and to think together
The Small Business Act may not have a huge initial impact, but it will hopefully be a watershed moment for British entrepreneurs. It should be a wake up to SMEs that government has realised it need to work closer with them – that the power balance is more level than ever.
Unclear of what’s really fuelling the economic revival, the government is riding the coat tails of SME success. It’s not quite sure how the wearer is progressing so well, but it is desperate to be at the finish line with them when they get there to share the credit.
It’s time for entrepreneurs to realise their collective power and run the race on their terms.
Jane Ollis is managing director at RIFT Accounting
Further reading on SMEs: Does tax avoidance in large corporates disadvantage SMEs?