What will Labour mean for SMEs?

What will Labour mean for SMEs?

The general election saw the Conservative Party swept aside after 14 years in power and ushered in a new Labour government that professes a desire to change Britain and bring back stability. The new Prime Minister, Sir Keir Starmer, says he wants to work with business to grow the economy but it’s still unclear exactly what this will mean.

The new government has promised to introduce new legislation and regulatory reforms designed to significantly benefit small business and it has won the backing of business leaders including Dragon’s Den investors Deborah Meaden and Theo Paphitis. Its plans include, for example, better access to banking services and stamping out late payment of invoices.

The Policy Chair of the Federation of Small Businesses, Tina McKenzie, congratulated the new Prime Minister and said the clear election result gives hope that political stability can lead to economic stability and recovery. Nevertheless, SMEs are holding their breath while they wait to see what a Labour government means to them.

What businesses think

Luke Hughes, founder and creative director of custom furniture designers Luke Hughes, says: “The great hope of a new dawn is all very well and it’s wonderful to see some of the hubris of the previous government being suitably punished. But the jury is out as to whether this is just revenge by the electorate and whether it can translate into genuine change.”

Martin MacConnol, founder of creative content agency Wardour says: “The election result wasn’t unexpected, but I now feel as though we’ve swapped one uncertainty for another. Instead of the chaos of the Conservatives we now have the uncertainty of what Labour will actually do.

“They have made a lot of the right noises for business. But with the majority they now have, will they stick to those promises or go for a more radical agenda? I expect I will probably end up paying more tax, but the flip side is that we may get the British economy booming again.”

Strengthening workers’ rights

It’s certainly clear that workers’ rights are a high priority for the government, which has promised to introduce a new Employment Bill to Parliament within 100 days. The party says the bill will be “the biggest upgrade of workers’ rights” in a generation. It’s likely to include proposals to strengthen rights over unfair dismissal, sick pay and zero-hour contracts.

"With the majority they now have, will they stick to those promises or go for a more radical agenda?

The government is also committed to the introduction of a ‘real living wage’ by changing the Low Pay Commission’s remit to account for the cost-of-living, alongside median wages and economic conditions, rather than focusing on inflation only, when setting suggested rates.

It has also said it will extend the time within which employment tribunal claims must be made from three to six months. And as well as increased enforcement of employment law, Labour has also promised tougher penalties for employers who fail to comply with tribunal orders. This might include personal liability for directors of those companies.

There are also special proposals for the care sector, which suffers from high rates of staff turnover. These include collective bargaining under a new Fair Pay Agreement and ensuring travel time that is working time is paid. There are also plans to improve training and all of these changes are likely to have costs for employers but could end the high turnover rates we have seen.

Single worker status

Another significant plan under the ‘make work pay’ initiative is to introduce a ‘single worker’ status. Currently, UK employment law recognises three types of employment status: employees, workers and self-employed. While employees have extensive statutory rights and protections, workers only benefit from some, and genuinely self-employed people do not benefit from any of these protections.

Labour proposes scrapping the ‘worker’ category and giving workers full employment rights, so that there is no longer a distinction between workers and employees in terms of employment rights. There is a question, however, as to whether their plan will really lead to stability in the contracting landscape and  whether it will even become reality. It’s a drastic overhaul of the current rules which would require a great deal of consultation and effort at a time when the government is dealing with other more pressing issues.

It remains to be seen whether all of Labour’s proposed changes are enacted and whether the new government will fulfil its promise to support small businesses. Change is certainly coming. What sort of change? We don’t yet know.