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What does a new Labour government mean for your small business?

Labour has won a landslide victory in the 2024 UK general election. Let’s take a deeper look at what they’re offering SMEs.

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The Labour party are now in government following a landslide victory at the 2024 general election

After a six-week campaign of debates - the results are in and Labour have emerged as the victors. 

While broadcasters, pollsters and pundits had been saying the election result was a foregone conclusion - it’s still been an uncertain time for small businesses. It perhaps hasn’t helped either that conversations around policy have been light on detail. 

However, off the back of several cabinet changes in the past few years under the Conservative government - including seeing five chancellors and five business secretaries - small business owners have already shown their ability to adapt and show resilience for a while now.

With a clear mandate from the general public, will Labour be able to bring about the change and stability they’ve promised? Things are bound to move quickly - Labour have their eyes on reforming business rates and the British Business Bank, establishing Great British Energy and putting an end to late payments to name just a few things. 

A more concrete roadmap is likely to be set out in both the King’s Speech on July 17 and in the autumn budget later in the year. But, before all of that, let’s take a deeper dive into what’s already been said, as well as what’s rumoured, to help you and your business prepare for the coming months. 

No tax rises, for now

Sir Keir Starmer has repeatedly said that there will be no increases to income tax or National Insurance contributions, which is likely to be welcome news to your employees. 

They have also confirmed that corporation tax will be capped at 25%. This might help support growth as small businesses will be able to deduct capital investments - but any direct benefit of this cap will depend on both your profits and type of business. 

Corporation tax can be complicated - so it’s a good idea to read up current and previous rates and allowances from HMRC. If you’re still confused, you can read detailed information from the Institute for Fiscal Studies or speak to a financial advisor.

Looking at VAT, we find ourselves in rumour territory, but it’s worth noting all the same. The previous chancellor, Jeremy Hunt, introduced a rise to the VAT threshold from £85,000 to £90,000. This was welcome news to many small businesses who were otherwise close to needing to pay VAT - the higher the threshold, the more money a business can make before it needs to pay VAT.

But it’s unclear whether Labour will keep this higher threshold in place as they look at options to find money for some of their spending ambitions.

Support against late payments

One of the biggest hits to a business’ cash flow is the late payment of invoices. All businesses need to know when they’ll be paid, and having the ability to rely on fixed dates of payment is essential. Unfortunately, many invoices are settled late - and the process of chasing payments is both time and cost consuming.

Labour has said it will stamp out late payment of invoices to small businesses, requiring large businesses to better report on their payment practices in their annual reports. It’s thought this move will expose late payers and make them more accountable. 

This tackles the pressures felt on the shoulders of small businesses and the self-employed, with Labour saying this action will “help unlock £20 billion in unpaid invoices.”

Growth for businesses all over the country

Many businesses have said they struggle to access the funding they need and the opportunities to grow - particularly outside of London. 

To tackle this head-on, Labour intends to reform the British Business Bank, giving it a stronger mandate to support and invest in small business outside of London. It’s unclear what this reform will look like - and how they’ll get funding to those that need it. More information is bound to be unveiled in the coming weeks, and we’ll update as soon as it is. 

National public contracts are also set to be reformed under the Labour government. In a bid to ensure more SMEs have a fairer shot at winning public contracts, the new plan will make it so at least one SME is on every public contract shortlist. 

Labour also wants to create more funding for small businesses in the tech and innovation sectors. The idea here is to introduce a new Regulatory Innovation Office to be accountable for funding opportunities. Coupled with a proposal to create more stability with research and development credits, it’s hoped action in this area will help small businesses in these fast-growing sectors.

Revitalising high streets and business rates

A significant grumble from small business owners and the general public is the perceived lack of fairness in rates between high street businesses and tech giants. To address this, Labour will scrap the existing business rates system and replace it with a new system to level the playing field. 

It’s not clear what this new system is yet, but with the promise it will bring high streets back to life - it’s likely to be welcome by many across the country. 

Labour also pledges to bring back more opportunities for in-person banking. Many small businesses may embrace tech by banking with challenger banks that operate entirely online. But there are plenty of people who need branch services. Self-employed and cash-in-hand workers will all benefit from the ability to pay in their earnings - allowing them to then access other banking services as well as financial security. 

It’s expected these new banking hubs will be rolled out at pace, with Labour seeking to change regulation quickly to accelerate their ambitions. 

Stability in energy

Costs of business energy bills have hit eye-watering levels in recent years. This has been for a number of reasons, made worse by the Russia-Ukraine war.

A flagship pledge in the Labour manifesto is to establish Great British Energy. This new clean energy company promises to reduce bills and boost Britain’s energy security. In short, it’s hoped this will keep bills low regardless of global events. 

This is a longer-term project and it’s unlikely we’ll see reductions in any bills in the immediate future. But it’s certainly one to watch, and it’s a promise Labour will be measured against in the coming years.

A closer relationship with the EU?

Again, we’re back in rumour territory, but Labour has said they will approach Britain’s relationship with the EU with a renewed sense of optimism and a less defeatist attitude. 

What that means in reality is yet to be seen - but one manifesto promise is to boost small business exports by publishing a trade strategy - delivering clear advice to get new businesses exporting. The plan, while not yet revealed, is to work closely with the Federation of Small Businesses to remove barriers where possible to help improve efficiencies and reduce costs when it comes to imports and exports from the UK. 

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About Kyle Eaton

Kyle is a finance editor specialising in all things related to small and medium enterprises (SMEs). He has over ten years' experience working in financial services and as a writer.

View Kyle Eaton's full biography here or visit the money.co.uk press centre for our latest news.