Coffee House

The world belongs to small businesses. Why are we stifling them?

22 August 2012

12:10 PM

22 August 2012

12:10 PM

From the moment the Queen uttered the words, ‘Good evening, Mr. Bond,’ Britain was caught in a two-week Olympic bubble of sporting and national pride. I’m sorry to kill the buzz, but while Mo Farah was hurtling at full speed towards the finishing line, Britain’s economy was crawling on its knees.

We’ve seen a shock rise in inflation. We’ve seen warnings from the TUC that the job outlook for the young is its toughest since 1994. And, with Britain now being the only major economy apart from Italy to stay in recession, we’ve been dubbed the ‘sick man of Europe’.

If Britain is going to perform as well as its athletes, this government needs to stop acting as a kind of feudal landlord that takes our money, no questions asked. It needs to stop patting us on the head while telling us that everything will be okay. It won’t: if we keep doing what we’ve done, we’ll get more of the same — sluggish growth and high youth unemployment. It’s time to rewire the entire system and put power in the hands of this country’s entrepreneurs.

[Alt-Text]


We can start by cutting the oppressive red tape that is choking the UK’s 4.8 million SMEs. The government could remove statutory PAYE and National Insurance contributions for companies under three years’ old. And it could abolish IR35, the punitive and complicated tax code that is designed to catch ‘disguised employees’.

The government ought to release microfirms (companies employing fewer than ten staff) from 75 per cent of employment regulation. It’s absurd that a tiny cake-making business with three hires has to comply with the same rules as a manufacturing firm with 100 employees.

I argue in my book Welcome to Entrepreneur Country that the government needs to lift the tax burden from the ‘Davids’ — the vital six per cent of small but high-growth businesses currently creating 54 per cent of all new jobs — and enforce the tax code on the ‘Goliaths’, the large corporates. Take Google, for example. This country’s weak tax laws meant that the online search giant paid just £8m of corporation tax in Britain last year – despite making more than £6bn in revenues in this country in the six years to 2010. How does that make sense? Why are our small businesses subsidising big businesses?

The Davos vision of the world is that the people who count are at the top of the pyramid — the country leaders, the corporate big shots. The assumption is that the people at the bottom have no clue how to take care of themselves or design their own futures. I couldn’t disagree more. It’s the world of the SME, the sole trader, the individual capitalist that will drive economic growth. Very few people under the age of 30 believe they work for someone else; they all think of themselves as their own brand, they all take a dim view of what the government is providing in terms of public services and they all want to set their own rules. It’s time to hand the baton to the country’s entrepreneurs — and let them run with it.

Julie Meyer is the founder of Ariadne Capital and the author of Welcome to Entrepreneur Country: What it is, How to find it, Why you should go there, published by Constable Robinson.


More Spectator for less. Stay informed leading up to the EU referendum and in the aftermath. Subscribe and receive 15 issues delivered for just £15, with full web and app access. Join us.



Show comments
  • Cookie123

    “….the fact that 1,700 new businesses are being set up per week doesn’t suggest that existing rules are terribly onerous.” Oh yes they are!

    Have you ever wondered what happens when an enterprising person is made redundant? First they look for work, then, when they don’t find it, they start their own business. That’s why 1,700 new businesses are being set up per week. Of course, only a small proportion of these entrepreneurs succeed, but when they do, it’s down to a mixture of luck, hard work, risk taking (ie: putting their houses on the line – so you can add foolhardy guts and sheer bravado) – and last, but by no means least, some sort of expertise coupled with business sense.

    When they succeed, they often go on to become employers – which, surely, is what this country needs. So what’s their reward? To spend their time filling in forms (or paying someone else to fill in forms) to comply with some of the most ridiculous rules and regs. And yes, other European countries have even more rules and regs than the UK, but a) most of them are a lot less fussy about compliance – and b) the ones that ARE compliant suffer just as much as our home grown entrepreneurs (so maybe Europe should lighten up on the regulations, too). Julie Meyer is right. Let’s give our SMEs a better chance of success. Our future is undoubtedly in their hands!

  • http://www.facebook.com/qster1 Susie Qster

    agree…….

  • http://twitter.com/ianwalkeruk Ian Walker

    Small businesses can’t afford lobbyists. And lobbyists dictate 95% of government business strategy. The other 5% is knee-jerk reactions to red-top headlines about fat cats

  • Kevin

    Well written.

  • t mccall

    deregulation of employment legislation for small businesses is essential if the UK is to get back on its feet.

  • William Blakes Ghost

    Yawn! Not another bloody writer jumping on the Olympic bandwagon. God they are so boring and unimaginative. Secondly Cameron lumbered his party with the Libdems and sadly they seem unwilling to do anything that will help growth and furthermore Cameron is to weak and impotent to do anything substantive about the Libdems.

    So basically we’re stuffed thanks to Dave…..

  • Tarka the Rotter

    90 per cent of the country is still white British – wouldn’t guess so from the picture above, or are you pointing out the future to us all in no uncertain terms? Just asking…

  • BuBBleBus

    A word of caution, in the FT today there is salutary reminder for how things can go wrong, look at South Korea that beacon of hope: where 80% of the young go to university (parents get into deep debt), nearly of third of workforce is self-employed and many badly in debt because of borrowing to set their small businesses up.. the place is heading for disaster as so many cannot repay, they end up in the clutches of loan sharks. South Korea is basket case according to the FT today.

  • BuBBleBus

    A word of caution, in the FT today there is salutary reminder for how things can go wrong, look at South Korea that beacon of hope: where 80% of the young go to university (parents get into deep debt), nearly of third of workforce is self-employed and many badly in debt because of borrowing to set their small businesses up.. the place is heading for disaster as so many cannot repay, they end up in the clutches of loan sharks. South Korea is basket case according to the FT today.

  • Jez

    Onto the business thing; The overall competance package oozed from this government seems to be exceptionally retadent when it comes to supporting small business- probably because it comes from a vast amount of ‘flyers’ like the Guardian readers mentioned in an earlier post. In a thing called ‘a partnership’ there has to be Government investment to kick start the ecomony. Then this would be in conjuction with relaxing the stifling penalties administered by the government (150.9p Deisel yesterday! Taxed to death!**)- then this would ecomomically fire things up!
    We somehow seem to be shackled to international monetry disasters even though they’re f*ck all to with us. Does it seem that Osborne is trying to just look after his mates that he went to school with over the greater good of the country?
    If anyone has an entrepreneurial idea or skill then watch it get suffocated and the smashed to bits by a sea of government departments that have to now justify their existences- I mean, just how many departments, upon taxes, upon red tape do you have try and circumnavigate before you can flow freely and actually do some work if you are a small business?
    This country seems to be knackered.
    **Oh, and if there is subversive reasons why fuel etc are actually going up through the roof…. like endemic wash trading on the markets (?) then instead of Osborne shaking hands in staged photo shoots (with people in that he probably wishes he will never have to meet ever once he retires), he needs to ‘man up’ and clean out the sewers pretty sharpish.

  • Jez

    Onto the business thing; The overall competance package oozed from this government seems to be exceptionally retadent when it comes to supporting small business- probably because it comes from a vast amount of ‘flyers’ like the Guardian readers mentioned in an earlier post. In a thing called ‘a partnership’ there has to be Government investment to kick start the ecomony. Then this would be in conjuction with relaxing the stifling penalties administered by the government (150.9p Deisel yesterday! Taxed to death!**)- then this would ecomomically fire things up!
    We somehow seem to be shackled to international monetry disasters even though they’re f*ck all to with us. Does it seem that Osborne is trying to just look after his mates that he went to school with over the greater good of the country?
    If anyone has an entrepreneurial idea or skill then watch it get suffocated and the smashed to bits by a sea of government departments that have to now justify their existences- I mean, just how many departments, upon taxes, upon red tape do you have try and circumnavigate before you can flow freely and actually do some work if you are a small business?
    This country seems to be knackered.
    **Oh, and if there is subversive reasons why fuel etc are actually going up through the roof…. like endemic wash trading on the markets (?) then instead of Osborne shaking hands in staged photo shoots (with people in that he probably wishes he will never have to meet ever once he retires), he needs to ‘man up’ and clean out the sewers pretty sharpish.

  • Shinsei1967

    Although I agree with your call for deregulation of micro businesses the fact that 1,700 new businesses are being set up per week doesn’t suggest that existing rules are terribly onerous.

    And the reason why Google pays practically no corporation tax in the UK is because of the Single Market and the fact that as Google is based in Ireland it pays all its pan-Europe corporate taxes to the Irish government.

    • Archimedes

      The number of businesses being set up reflects market behaviour, the number of businesses that survive reflects regulation. How many of the 1,700 businesses survive?

      • Shinsei1967

        All the small businesses I know find the regulatory regime time consuming and irksome rather than an actual brake on their business success. Lack of demand and ungenerous banks are by far their biggest concerns.

        • Publius

          “Lack of demand”

          You mean by this that people are not buying things because they either do not want them or cannot afford them, right?

          • Shinsei1967

            Yup.

    • Tom

      The trouble with the argument on regulation is that the UK is already the second most deregulated economy in the OECD. If regulations are to blame, why are all those other countries with more tightly regulated labour markets and company law outperforming the UK?

  • Jez

    Great visual to launch the article……
    Talking of that Utopian liberal money shot of a photo there; I hope that these young people in the picture the very best- but they’ll be lucky to hit the heights in the major industries that are held so dear by our ruling elites; Poltics, the media and finance.
    The ethnic / social make ups of these entities seem to be very exclusively hand picked- be of upper middle class suburban to upper class and view the Guardian as the Oracle of universal information whilst adhering to the ideology; ‘what’s good for the mass untermenschen out here (especially the white working class) certainly aint’ gonna happen in our office!…. er, well- we’ll pretend it does anyway by cynically selecting certain groups to front major percentages of viuals that the audiences will soak up’.

  • Archimedes

    I do wonder if the UK has missed the gun on deregulating small businesses. We’re no longer at the trough of recession where behavioural changes can be ridden and boosted by policy. Of course, that’s not to say there wouldn’t be some benefit to doing it now: PAYE is a pain in arse that provides a disincentive to offering full time jobs, employers NI should never have been introduced, and neither should IR35.

  • Russell

    And not a white face was to be seen at Georges shindig photcall!.

    • Sue

      Don’t be silly, we’re not important, it’s not our country anymore. It belongs to the politicians.

    • Sweetpea

      You’re wrong, of course. The man with the power and the responsibility, but seemingly without the intellect or talent, to do something has a very white face. Cheers!

      • Nicholas

        People on the right are always wrong – and those on the left always right, even when they make mistakes or do things that threaten the well-being of future generations, like plot unrestricted immigration in order “to rub the right’s nose in diversity”. Cheers!

        • Sweetpea

          Ooh poor Nicky! Is his wickle nosed all rubbed raw? It’s so hard being part of the race that holds the vast majority of the wealth and the positions of power and privilege, isn’t it? As for folks on the left always being right. – I heartily disagree – the gentleman on the left in the photo above has never taken a decision that has turned out to be anything other than wrong – his legacy to future generations does not bear thinking about! Cheers!

          • Nicholas

            Try commenting without the puerile abuse and classic lefty use of the diminutive. And no, its not hard at all. Cheers!

            • Sweetpea

              Sorry. Just you have misused that quote so many times, your nose must have been rubbed raw. I prefer it when you preach harmony, unity, love – so don’t worry about diversity; it just is, and you are a wonderful part of it! Peace out!

      • Nicholas

        People on the right are always wrong – and those on the left always right, even when they make mistakes or do things that threaten the well-being of future generations, like plot unrestricted immigration in order “to rub the right’s nose in diversity”. Cheers!

Close
Can't find your Web ID? Click here