A plan for UK growth needs more than warm words: An entrepreneur’s call to arms
2 March 2012 12:39am
LIKE most entrepreneurs, I love my business and I want to grow it. It would seem, from all the government’s powerful rhetoric, that David Cameron loves my business, too.
After all, the official line is that this is the year the government needs to unlock the creativity and entrepreneurial talent buried deep in many of us and make Britain the best place to start, finance and grow a business.
As an entrepreneur, I can honestly say that I wasn’t sitting here waiting for this announcement before leaping into action. On the contrary, I and my entrepreneurial compatriots are working hard to grow our businesses here and abroad. My company, Ten, is expanding rapidly in the UK and opening new offices in Mexico, Brazil, Japan, Russia and Singapore in the next 12 months.
What we need from government, to help us deliver more growth and jobs for the UK, are several common sense changes to employment law and lower taxes on job creation.
George Osborne started well by increasing the rate of income tax relief for the enterprise investment scheme (EIS) to 30 percent; he also has plans to double the investor limits to £1m per year from April and has extended the entrepreneur relief to £10m. All welcome.
Beyond this, the coalition needs to realise that while warm words may help convince the public that there is a plan for growth, they just don’t cut it with business owners. Entrepreneurs don’t need to hear any more from politicians about “exporting more”, “working harder”, “risking more”. If the people behind the startups didn’t have this drive and ambition, they wouldn’t have founded a business in the first place. What they need is bold and decisive leadership from those in power to help where they can.
Take the state of the suffocating employment laws surrounding recruitment and dismissal. With simple changes that would cost the taxpayer nothing the Prime Minister could alleviate the expensive and stressful administrative burdens that seriously affect startups’ room for growth. Of course employees need protection from unscrupulous employers, but the pendulum has swung too far, effectively favouring vexatious claims from employees.
Currently, the risks that are faced by business owners when trying to comply with hiring legislation represent one of their deepest money pits and biggest causes for emotional distress and distraction. The Forum of Private Business estimates that a typical small business spends 34 hours a month dealing with the red tape and an estimated £1.4bn is spent on advice from consultants to avoid it – a cost that few small businesses can afford.
When speaking with MPs, ministers and shadow ministers about this, they seem afraid, unwilling or unsure about tackling the problem. They seem too fearful to shake up laws that are so heavily embedded in European legislation, or just not confident enough that they can win support for the changes. If now isn’t the time to change European law, while the continent is going through an employment crisis, when is?
Instead, they construct policies like the “no-fault dismissal process”, proposed by venture capitalist, Adrian Beecroft, that, while helpful, only go so far in relieving the pressure for small enterprises.
The loopholes surrounding this policy wouldn’t prevent employees laid off through the process from claiming unfair dismissal through discrimination, a claim underpinned by European legislation.
The government should introduce a cap that would limit the amount the employer ultimately pays out: businesses must be able to calculate exactly the risk and impact of managing an ex-employee pushing to extort a maximum payout.
Another sensible step would be a small, mandatory deposit paid by the claimant in case of loss, so that he or she has some risk to discourage claims by chancers. These measures would help entrepreneurs sleep at night.
Another simple, albeit expensive change Cameron can make to encourage wealth and job creation is to lower employer national insurance rates. Besides it being nonsensical to charge companies for employing people, the current rate of 13.8 per cent is strangling many established enterprises, let alone new ventures. Will this proposal be dismissed as too expensive or is it the big idea to kickstart a jobs-led recovery? I’m not sure the billions spent on quantitative easing wouldn’t be better directly spent on job creation.
An entrepreneur needs assurances that their enterprise will be working in an environment where the laws reflect a true understanding of the needs of wealth and job creators. While the politicians’ rhetoric may persuade the public that the government is introducing firm measures for business growth, entrepreneurs don’t get their inspiration from warm words of encouragement used to fill the gap left by the lack of a serious plan for growth.
Alex Cheatle is CEO of Ten Lifestyle Concierge, a global concierge service supporting high-net-worth individuals on behalf of international clients such as RBS, Coutts, Barclays and Citi. www.tenlifestyle.com
Simple changes costing the taxpayer nothing could ease stressful burdens on startups
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