Main business policies and the views and recommendations of the BVCA
Raising the minimum wage to £8 an hour by 2020
Increasing the minimum wage or implementing a living wage is a desirable policy outcome but careful analysis needs to be done to ensure it doesn’t have a chilling effect on hiring.
In sectors that are characterised by minimum wage labour such as social care, businesses would like to work with the government on paying higher wages, provided more investment is forthcoming. At present, margins are wafer thin due to Local Authority cuts.
Improving the link between executive pay and performance by simplifying pay packages
If the Labour Party is minded to go in this direction, we would encourage them to exempt small businesses from such proposals to insulate them from unnecessary cost and regulatory burden.
Imposing a cap on workers from outside of the EU and restricting the movement of economic migrants to the UK from future new members of the EU
This is a very blunt instrument and could prevent small businesses from getting the skilled employees they need to grow their business. There is a balance to be struck between improving the domestic skills base and managing migration but it should not be small businesses that are caught in the middle.
Visas for skilled migrants and entrepreneurs – particularly the Tier 1 Exceptional Talent Visa, the Tier 1 Graduate Entrepreneur Visa, the Tier 1 Entrepreneur Visa and the Tier 1 Investor Visa – should actually be increased since these are exactly the people that Britain needs to succeed in the global economy. Under the Tier 1 Investor Visas, applicants can currently invest in low-impact select gilts to qualify. The future Government should require this money to be invested in unquoted trading companies or through an approved VCT, to create a direct link between these visas and job creation.
Maintain the most competitive rate of corporation tax in the G7
This parliament has been characterised by tax stability with year on year cuts in corporation tax. Whilst Labour have said that this reverse could pay for a tax cut for smaller companies, this would only be a short-term benefit. Ultimately small businesses, particularly those backed by private equity and venture capital, want to grow and become larger ones.
A “proper” British Investment Bank, with funds distributed through a new network of local and regional banks – a British version of the German ‘Sparkassen’
The BVCA, in its 2013 Growth Initiative, recommended learning the lessons from the long-term, regional, industrial approach to business finance deployed in Germany. Conventional banks have proven themselves unable or willing to originate enough credit to small businesses so a new approach is called for.
A secondary priority must be to diversify the finance available for businesses, which means improving the market for non-bank lending, debt finance and of course, venture capital as well as corporate venturing. The latter could be facilitated by reintroducing the Corporate Venturing Scheme aimed at encouraging direct investments from big business to small business, or by introducing a venture capital trust (VCT)-modelled corporate venturing scheme designed to encourage indirect investments.
Cutting and freezing business rates for small business properties
Business Rates remain a huge cost for small businesses and it is a theme that has been raised by BVCA members and portfolio companies time and again. A review across the board is much overdue but a cut for small businesses would be particularly welcome.
Introducing a Small Business Administration to co-ordinate work across government to benefit smaller businesses
In the US, a successful program in the form of the Small Business Research Administration is a valuable source of finance for small businesses, and access to government procurement programmes. However the market dynamics in the US are of course different, so we would caution against trying to replicate the model exactly.
Having a cabinet level representative, exclusively responsible for high-growth businesses, is certainly worthy of replication. The innovation component of the UK Small Business Administration proposal is also worthwhile and we agree with the need to scale-up the Small Business Research Initiative so that government departments are committing at least 2.5% of their research and development budgets to small businesses. There is a huge potential for the NHS in this area.
Setting a broader direction for industrial strategy, so it includes domestic sectors with the highest shares of employment and output
Backing success to encourage sectors where we are already strong is the best approach to industrial policy. An exemplar is Graphene, a potentially revolutionary material. Pioneered at a facility out of the University of Manchester, more should be done to help this facility compete globally.
In South Korea, with the help of Samsung, more than five times as much investment has been directed at their graphene facility. Similar backing for successful UK industry and technologies is required to help us compete globally.
Implementing a long-term innovation strategy in science and research to help create new products and improve the UK’s record of underinvestment in R&D
This parliament has seen protection of the science budget at a time when budgets have been squeezed everywhere. But commercialising our world-class intellectual property base, and encouraging more R&D spend from UK corporates remains a priority.
Further tax and related incentives should be put in place to enhance further university technology spin-out company activities so that where strategic advantages exist in certain clusters, they can further benefit from the tax system.
R&D tax credits should be maintained and extended for SMEs and catapult centres should be better scaled to concentrate resource in key geographies and sectors where the UK is already strong. We also believe that by enhancing their support for early research phases, Catapult Centres would be better positioned to ensure that promising blue skies research moves closer to commercialisation in order to bridge the so-called “valley of death”.
Working with the independent Competition and Markets Authority to deliver new challenger banks
More competition in the banking sector, and indeed diversity of funding sources for businesses more generally is clearly required to match the demand from the UK’s growing businesses. On banking in particular though, policy focus should only be on lowering barriers to entry so they can more easily challenge incumbents. It should not be attempting to control market share of existing ones.
Devolving power and funding worth at least £30bn over five years in areas recommended by the Adonis Review including employment support, transport and housing, skills and business support
Encouraging more employers to pay a living wage by establishing ‘Make Work Pay’ contracts, giving a tax rebate to those companies that sign up to become living wage employers in the first year of the next Parliament
Encouraging employers to pay the living wage is reasonable, but expectations should be managed with respect to small businesses. The burden of taking on staff is disproportionately harder and efforts here should concentrate on baring down on national insurance costs.
Supporting employee buy-outs when businesses are being sold
There is still very little detail on exactly how the policy could be implemented without harming British industry and giving entrepreneurs and investors a reason to hold back on their investments. The important issue is that there is a level playing field in that an employee-backed bid is treated exactly the same as any other bid.
Strengthening the public interest test to protect the UK’s science and research base
Changing takeover rules to enhance the role of long-term investors
Businesses will be concerned by such proposals in relation to company takeovers, which suggest a more interventionist approach to business and could harm investor confidence.