There were an estimated 4.5
million business enterprises in the UK at the start of 2006. Almost
all of them, 99.3%, were small businesses defined as employing
between nil to 49 employees. Only 27,000, 0.6% of the total, were
medium-sized, employing 50 to 249 employees and 6,000, 0.1% of the
total and termed as large, employed 250 or more employees.
At the start of 2006, UK private sector enterprises employed an
estimated 22.4 million people and had an estimated combined turnover
of £2,600bn. This definition of the private sector excludes the
not-for-profit sector, a term I hate and despise when it is
brandished in a manner to suggest some form of moral superiority.
For there is nothing wrong with making a profit: everyone who ever
picked up a wageslip has just collected the profit from applying
their individual talents for reward. But enough of that, we will
revisit the not-for-profit sector later this year to identify those
that inhabit the territory with honour – and those that do not.
Small and medium enterprises together employed 13.2 million, 58.9%
of private sector employment in the UK, together with 51.9% of the
turnover.
Small enterprises alone accounted for 47.1% of employment, 10.6
million people, and 37.2% of turnover, £967bn.
In the context of the UK, these are mighty numbers and in a sane
world, the whole SME sector would be nurtured, listened to,
encouraged, cherished even, for the people that make all of this
happen contribute much, many of them to the jeopardy of their homes
and their lives.
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The number with personal
guarantees behind their business funding and supplier arrangements
is not known, but is substantial. All of them work very long hours,
though it is a matter of choice in improving their lot.
A recent survey of the SME sector by Bank of Scotland Business
Banking found that British entrepreneurs clock up over 47 hours
every week and for businesses growing at 10% per annum, the average
working week is 51 hours.
Of them, 58% will not get a two-week summer break.
More than six in 10 take less than 20 days’ holiday a year, the
statutory minimum for UK employees, while 22% take less than 10
days’ holiday a year.
Even those who break free cannot switch off completely, 26% think
constantly about their business or frequently check in by e-mail or
telephone.
So at a time when the government of the last decade has stressed the
importance of the work/life balance, those driving a hugely
important sector of the UK economy are not only suffering from a
chronic imbalance, but this Labour government, and a bunch of
unelected bureaucrats in Europe, are heaping ever more stress upon
them.
Already, of SME owners admitting to stress, the survey found:
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54% said it damaged
their home life;
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39% said it affected
their home life;
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36% said it affected
their relationship with friends and family;
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32% said it adversely
affected their health; and
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25% said it affected
adversely the way they treated colleagues.
How long before our
dictatorial health service refuses to treat SME owners because of
their unhealthy lifestyles?
Some find stress a motivator that drives them to greater efforts but
other stresses come from just trying to do business in an
increasingly hostile environment.
Consider small shopkeepers who not only have to contend with
competition from supermarkets but who are also plagued by vandalism,
shoplifting, abuse and robbery yet who often find little remedy
through our police and courts.
Pressures through regulation have grown much worse over the last
decade, thanks to the Labour government, one with members drawn from
a very narrow section of society and few, if any of them, with the
slightest notion of the importance of wealth creation and running a
business.
Running a small business depends upon teamwork. Being able to root
out and get rid of non-performing members of that team is vital yet
the process has been turned into a bureaucratic, red-tape bound
marathon with no-risk options for dismissed employees to try to
blackmail employers with the threat of weeks of management time
wasted in a tribunal. I take my hat off to those managers taking
such try-ons all the way rather than paying out blood money so they
can get on with running their business.
We have spoken many times of the ridiculous, unreasonable and
commercially unsustainable impost of maternity laws, especially
involving specialist personnel and the unfair burden their
colleagues have to carry.
The upshot is that many businesses, not a few owned by women, will
not recruit potential breeders, meaning a massive loss of talent to
business and job opportunities for young women.
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The relentless assault of
HMRC upon the SME sector is becoming oppressive, tyrannical and in
one case, wholly unjust. Having lost the Arctic Systems case in a
petulant display that saw the Law Lords throw it out five-nil, HMRC
is now seeking to move against income splitting. Our divorce courts
accept that a wife at home makes a 50/50 contribution to the success
of a man’s earning power, or vice versa. But not HMRC.
It now wishes to define the workplace duties of the spouse and to
only allow what it considers to be a commercial reward for their
role and allocate all other income back to the earner to fall into
the highest tax brackets. It chooses to ignore a host of other
factors impacting upon the life of entrepreneurs worthy of greater
return.
Corporation tax upon small company profits is to be raised from 18%
to 22% and the outrageous proposal that taper relief upon assets
sold be abolished and the CGT rate on disposal of a business be
slammed up 80% from 10% to 18% beggars belief. It now puts those
enduring some of the trials we have been discussing, and creating
employment as they do so, on a par with buy-to-let landlords and
second-home owners.
There has been tripe aplenty in the media from Brown’s apologists
that this will make no difference to entrepreneurs. The common theme
amongst these splendid theoreticians is that none of them has ever
run a small business in their lives. One must also question their
basic understanding of human motivation, though that was ever the
fundamental flaw in left-wing thinking throughout the ages.
And to hear some sinecure-holding, final-salary-scheme pensioned
mouthpiece lecturing SME owners that they should be paying their
“fair share” of taxes is breathtaking in its ignorance, hypocrisy,
or both.
Brown and Darling need these tax revenues but to pay for the bloated
public service he has created and servicing the burden of the
mountain of public debt he has accumulated in so doing.
It would be different if government spending had been on
infrastructure and improving our population.
Are our roads and railways much better to speed the passage of
commerce around the country? Well, no. We do not need specialist
reports here.
Is our education system world-leading? I am afraid not. Despite
reports each year that attainment levels in our examinations have
improved year-on-year, the OECD has just published a report.
Mathematics standards amongst 15 year-olds have plummeted with 16
countries overtaking us since 2000, including Slovenia, Belgium, the
Netherlands, Denmark and Austria. The UK has fallen from eighth to
24th place.
Standards in reading have fallen: Britain went from seventh to
seventeenth place.
And in science they have fallen from fourth place in 2000, to
between twelfth and eighteenth place.
As Michael Reiss, director of education at the Royal Society,
commented: “Science and mathematics are essential to our economic
well-being, yet we are seeing the UK stumble down the world
ratings”.
Of great concern, too, is the fall we have also experienced in the
World Economic Forum Global Competitiveness report. The UK has
plummeted from second in the last report, to ninth. See table above.
Highlighted amongst our shortcomings were infrastructure
difficulties plus the complexity, and uncertainty of our taxation
policies.
The situation will not be helped either by Brown committing us to
the European Constitution, Treaty, or whatever disguise it travels
in, and its Charter of Human Rights. Technically these have been
waived in regard to the UK but the European courts must be slavering
for a chance to assert their primacy on that one and this will
impact heavily upon employment.
He has, at least, temporarily thwarted some ludicrous measures on
part-time and agency staff, measures that were welcomed by no party,
apart from unions more interested in membership numbers that the
health of the UK economy.
All of this official disdain for the SME sector is having an effect.
The Sheffield University School of Management report, details of
which were published in our Labour kills enterprise feature
(Business Money issue 152 page 26-27) demonstrated that business
start-ups have fallen worryingly in the decade since Labour came to
power. See the table opposite.
Gordon Brown professes to encourage support for entrepreneurs, but
his proposals to teach entrepreneurship, even if they happen, are a
non-starter. All an entrepreneur requires is the right environment
to make it worthwhile, to be able to earn, and keep, a reasonable
return on their efforts, to feel that what they are doing is
enjoyable and making a contribution.
If you need a classic example of government indifference to
business, just look at the way in which the SFLG scheme has halved
in take-up since the Graham Review changes. Apparently worthy they
may have been, in reality they have failed the scheme in its
fundamental purpose.
At every twist and turn, Labour has flown in the face of this
fundamental rule, often putting ideology, or ignorance, before
fostering an SME sector that contributes so much wealth to the UK.
If all of this sounds like a rant, go back and look at the numbers
with which I opened. If the SME sector were one of your clients and
the UK was your business, you would be verging upon madness to treat
it thus and it is in this depressing context, and faced with an
economy that is finally groaning, that our review of business
banking is written.
It is as well that all of the major banks have woken to the fact
that the likes of Allied Irish Bank (GB) have been making hay at
their expense, offering the kind of service to established
businesses that they were entitled to receive.
We have commented several times that big four rationalisation
exercises saw several babies exit the scene along with the bathwater
and a new breed of director is seeking to get them back again.
A banking sector that has experienced the Brumark case and the
wholesale migration of many of its risk functions to invoice finance
operations has also seen many changes in account infrastructure
management as internet-based operation has taken over. SME-owners
can do so much for themselves without the need to call-up or write
to somebody.
Halving of cheque use has helped eliminate another source of enquiry
of the bank, it has also reduced the inconvenience suffered through
uncleared effects.
The news that the Competition Commission has removed price controls
on small business bank accounts is, hopefully, the last gasp of
Cruickshank which ever had more than a whiff of a witch-hunt about
it. The confusion into which the government was thrown when the
long-delayed report had to confess that there were no witches, was
only too evident.
Gordon Brown, who stated that he wished to encourage two newcomers
to the volume market, Abbey and Bank of Scotland, promptly cut their
USP away from them by insisting that all banks pay interest on
credit balances on current accounts.
Despite this setback, smaller banks have cut into the market share
and this is a good thing. UK business banking is one of the
fiercest, and most competitive in the world with something for
everybody. The all-singing, all-dancing, all-round bank account can
be had – but at a price. There is also a host of options to suit all
forms of business.
As with every supplier, if you put the hours in, you will find the
one that suits you best and with internet access, falling cheque
volumes, electronic payment systems, debit and credit cards, and
cash machines on every corner, those options are much more so than
they were when we first published almost 15 years ago. And the range
was pretty good, even then.
If the big banks can truly get sensible discretionary levels back
into the branches it will not only improve customer relations, it
may also bring back the hordes who went elsewhere for credit because
they found a relationship and an answer that did not have to take
days grinding its way through some remote credit centre. I always
questioned bank claims that they lost less this way because I
suspect they also lent a great deal less too.
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Editor
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