Johnny Leavesley is a businessman and Chairman of the Midlands Industrial Council.
For most of last year, the business community treaded water, and tried to see where the political currents might take them. Short-term instability and indecision has now largely evaporated, and boardrooms in all sectors will be back to discussing expansion plans.
Business has demands of government, but what should be prioritised? First, which aspects of commercial life should the government listen to? The CBI is a big company organisation. It is important, but in recent years has been disappointingly pro-status quo, and an insufficient advocate of the merits of capitalism and trade.
Wealthy companies and industry associations can afford lobbyists to plead for them, so it is unsurprising when government listens, often granting disproportionate weight to their arguments. It is also tempting for Ministers to spend too much time pandering to high growth, new economy tech companies. A growing nursery of these start-ups is an essential for our future prosperity, but they are only part of the jigsaw.
The most important sector is one usually ignored. Small businesses constitute 99 per cent of all business in the country. There 5.6 million of them, employing 12.9 million people, and they do not speak or lobby cohesively. They are embedded in every community, everywhere and, if Boris Johnson wants to spread One Nation love into long- ignored raw towns and backwater regions, then policies advantageous to small commercial enterprises will be beneficial in manifold ways.
All business, always, will ask for lower taxes for obvious reasons, and there is great merit in this. However, the Prime Minister announced when campaigning that the planned reduction of Corporation Tax to 17 per cent would be cancelled to help hypothecate more spending on the NHS. Given that the current levy of 19 per cent is historically low anyway, he will be forgiven.
Yet corporate taxation is, perhaps surprisingly, not of overwhelming concern to small businesses. Regulation is. Whether a large or small business is concerned, much regulation and compliance are the same. This stifles growth, productivity and employment at the smaller company end, which in terms of macro-economic measurement can often be the most positively responsive.
In the autumn the Centre for Policy Studies proposed a Simple Consolidated Tax for businesses turning over less than £1 milliom, to take the place of the four main tax headaches – Corporation Tax, VAT, Employer’s National Insurance and business rates. Levied at an appropriate rate – probably 12.5 per cent of turnover – it would not be a tax cut but would be a huge boon in saving administrivia and would be a policy for growth. Whilst details and implementation would vary the effect, such bureaucratic simplification should be accepted and rolled out.
The single most overarching policy that would benefit all business is free trade. This should in theory be possible with the EU, although it seems likely that Remainer doomsters will gleefully emphasise any delay and departure from the current seamless arrangements. Still our largest trading market and neighbour, the EU is an internal Free Trade zone behind its protectionist barriers. We are climbing over the boundary, so whatever trade arrangements are settled will not be as cost free as they are now.
This is not a tragedy, however, given Brexit’s wider opportunities. The EU’s own worldwide trade agreements are skewed in favour of its own economic bias, namely manufacturing (German) and agriculture / food (French, Italian and Spanish). The UK is an economy more heavily weighted by its services sector, and we will now have the freedom to strike our own trade deals across the world that better reflect our own needs.
Free Trade is the elimination or at least the severe culling of tariffs imposed by government on imported goods, as well as the removal of other restrictive regulations and barriers to trade. It means that industrial components cost less, and the domestic consumer pays less. Tariffs do raise revenue for government – casting a protective wall around vulnerable industries that would be adversely affected by competition.
In the medium to long term, however, the rising tide of greater prosperity vastly outweighs the pain felt by a rebalancing economy. To counterweigh any competitive exposure that may affect regions outside London and the prosperous south-east, Freeports and Enterprise Zones should be established. The former allows for the import and export of tariff free goods and become manufacturing assembly hubs. The latter are tools to stimulate new businesses in deprived areas though tax breaks. Both would attract direct foreign investment, further balancing regional disparities.
The Department for International Trade promotes Britain across the world, but could also do more to promote the concept of exporting within UK businesses. There is some help through UK Export Finance, but much more could be done to promote opportunities, linking up with Chambers of Commerce and with the Foreign Office, which should have the promotion of trade as one of its primary duties.
To create a new generation of capitalists from amongst left-leaning millennials, and to help lance the student loan boil, a scheme should be devised whereby part of that debt is surrendered if the graduate sets up a new business and creates jobs.
The ingredients that business needs for a structural framework: stability, property rights, low(ish) tax, better infrastructure and a skilled workforce – look to continue or be improved. If these other aspects are adopted, then the economy will deliver much stronger growth, and with it the ability for the government to afford its huge and ambitious expenditure responsibilities.