Although the leading parties have acknowledged for some time that the potential of SMEs to boost economic growth in the UK remains largely untouched, the issue was a bigger focus of their campaigns than ever before.
Without addressing the problems affecting their growth small businesses can’t fulfil their expansion plans and contribute to the economic recovery. Therefore, as the new government finds its feet, it’s worth knowing what help is currently available to small businesses and how proposed Conservative policies correlate to your business’ needs.
Since the election results last month, the Federation of Small Businesses has highlighted research showing how access to finance is one of the top ten issues small businesses will be looking for the new Conservative government to fix.
The Conservatives have repeatedly talked about the importance of small businesses to the UK economy and according to their manifesto, small businesses will continue to get a good deal. Anna Soubry’s appointment as minister for small business, a newly created role as part of Cameron’s cabinet reshuffle, cements this commitment.
Improving access to working capital
Small businesses need better access to working capital in order to improve their cashflow and fuel economic growth. Research carried out by Everline and the Centre for Economic and Business Research (Cebr) at the end of last year revealed that despite SMEs having big growth plans for 2015, many aren’t able to carry them out because of a lack of finance. The reality is that in the current market, most small businesses will only approach traditional lenders when seeking funds for their business, even though the process can be lengthy and the rejection rate is around 50%[i].
The e-lending market is growing, offering small businesses a more flexible solution to their cashflow needs. Awareness of where to get a business loan is still relatively low, however. Recent efforts by the previous government such as passing the Small Business Enterprise & Employment (SBEE) bill which forces banks to share SME credit data with alternative lenders, will make it much clearer for SMEs to understand and access their financing options upfront. But more still needs to be done.
The Conservative manifesto appears to continue this level of support for small businesses with pledges such as the expansion of current initiatives like the British Business Bank. The Bank also recently announced plans to build on SBEE Bill legislation in 2016 with a new programme to facilitate the process for traditional lenders to refer small businesses that have been rejected for loans to alternative funding options.[ii]
Many small business owners are still unclear though on the benefits of using emerging lenders who can provide fast, flexible business loans designed to meet their specific needs. Judging by the steps that have already been taken by the current government and how far up on their agenda boosting small business lending is, the future is looking much clearer.
Addressing the skills gap
Everline’s research with the Cebr also found that SMEs aren’t able to carry out their plans for growth because of a skills shortage in the workforce. The London Stock Exchange Group’s recent “1,000 Companies to Inspire Britain” publication found that boosting the most promising “magic 6 per cent” of the UK’s four million SMEs would create as many as 230,000 new jobs and add £38bn to UK GDP.[iii] These fastest-growing companies across the UK were in the digital and technology sector as well as in the construction, manufacturing and engineering trades.
Unfortunately, these sectors require workers with STEM (science, technology, engineering and maths) subject knowledge, an area where a skills shortage is most evident. These areas aren’t taught strongly enough in schools and children aren’t made aware of the potential careers associated with them.
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The opportunities to learn skills related to STEM subjects post-school are limited too. There is also the problem of a lack of digital skills for small businesses to tap into. The digitalisation of business is fast moving and in order for them to keep up, new candidates need to be up-to-date with the latest technologies and tools to facilitate business growth.
The Conservative manifesto includes provisions to create three million new apprenticeships by 2020 and to take steps to nurture entrepreneurial and digital skills in schools. These proposed policies will eventually increase the pool of talent for small businesses to find the right people to help run their business. In the interim, just make sure you have a business plan that shows what areas you’re lacking in talent.
Understand the market
The Conservatives have realised that a thriving small businesses sector is essential to a sustainable economic recovery. Many small business owners are hoping that this general election will mark a huge milestone in their struggle for access to working capital and finding the talent they need to grow. Business leaders and commentators seem to agree with this, predicting strong growth for the sector over the coming years.
Election promises however aren’t always fulfilled, so, for small business owners, it is vital to understand the current market so you can take action when new help is made available to you. Knowing what this help is, as well as when and how to take advantage of it, will help set your business apart.
Further reading: Moving from business to politics
[i] Gov.co.uk HM Treasury consultation on SME finance: help to match SMEs rejected for finance with alternative lenders