Start-ups and small businesses are the growth engine for Britain’s economic future. There are over four million businesses in the UK with fewer than ten employees, accounting for over seven million jobs.
Regulation, and particularly employment regulation, is the main issue – other than financing – that start-ups and very small businesses and their representative business organisations complain about. In fact over half of Britain's smallest companies say that the complexity of employment law is putting them off hiring more staff. Now the Government has launched a consultation on simplifying the dismissal process and the concept of ‘compensated no-fault dismissal’ for micro businesses. It is something I have been calling for since being elected and, though it has taken longer than I would have hoped, I am pleased it is now underway. Ministers want to hear from those involved in business from across the country – and, given that one side of the Coalition has serious concerns regarding these changes, we need to ensure that the voice of business is heard loud and clear in the consultation.
The proposals would see the dismissal rules that a small firm has to go through to fire an employee reduced from twelve pages to one, and a new mechanism – no fault dismissal – allowing employers to give notice to employees in return for a compensation payment similar to the levels set for redundancy.
To kick-start growth, we need more individuals to take a risk and set up a business, and for existing owners of very small business to feel empowered and encouraged to hire staff and grow their firms. Many countries with highly regulated Labour markets make dismissals easier for start-ups and very small firms. Austria, Switzerland and Germany all make things more straightforward than the UK for their smallest firms to hire and fire. France, Australia and New Zealand have also developed government schemes to support businesses in their early years by removing much of the administration around tax and social payments. Britain should follow suit.
The Coalition has made a large number of important moves to ensure that government makes things easier for the smallest of our small firms. In addition to exemptions from business rates, reductions in the headline small business tax rate and waiving of National Insurance for start-ups outside the South East, it has begun to reduce the burden of rules and red tape. The EU has also established the principle of exemption from its directives for firms under ten people unless the proportionality of them being included can be demonstrated.
For the first time in over a decade there is a half-open door in London and Brussels for the case for giving start-up business even greater freedoms. We seek these further freedoms because, having set up and developed a business, I and other colleagues know first hand how difficult the early years are and how critical it is to allow the busy business owner to trust her or his instinct and focus on developing their product and market. With the current low growth environment and chill competitive winds from the East, it is even more important that we make this case.
By sticking with it in the toughest of conditions, owner managers across Britain have kept millions in employment and will be at the vanguard of new job creation in the months and years ahead. But these micro entrepreneurs are not only struggling with a difficult economy.
Labour piled the same rules and regulations on these firms as on the largest multinationals. The difference being that the larger firms have HR and legal departments. Whilst many business owners are resentful about high taxes, their ire towards government is even stronger when it comes to the fact that their most valuable commodity – time – is so frequently eaten up by a relentless set of requirements from London or Brussels.
The cumulative burden of red tape and regulation is hammering the very businesses we need to create jobs. It is holding back women and men who, in incredibly difficult economic times, have decided to take a risk. Now, more than at any other time in recent history, we need business and policy leaders to step up to defend them and do everything they can both to stop further regulation and turn back the clock on Labour’s time theft on our entrepreneurs.
In doing so, we have to make the case that the owner managers, frantic to succeed, passionate about their markets, are often the best custodians of employment relations. They have to be subject to only the minimal of state interference. If we can show that these changes work for our smallest firms and don’t lead to unfair treatment of staff then I hope and believe we can spread these changes further, to our bigger SMEs.
The consultation runs until June and I would urge any businessmen or women, any entrepreneur or any company owner to have their say and let the Government know what you think. You can find out more and have your say at the BIS website.