The Uncertainty Continues

Steve Leeves is a professional freelance writer with over 30 years’ experience in the business finance industry. He reflects on the continuing uncertainty for SMEs.

With the polling booths making more public appearances in the last 2 years than Howard Hughes did in his lifetime, life doesn’t get any easier for anyone trying to plan ahead for their business.

Let’s face it, although many people considered calling a snap election unneccessary, Mrs May was clearly confident of sweeping away any sign of opposition with such a huge advantage in the popularity polls. And if they’re honest, those in the other camp were probably just as convinced that her confidence was well placed.

What a difference eight weeks can make. No matter what side of a “hard or soft” Brexit you may sit this General Election was at least supposed to finally show us the way the compass was pointing and enable plans to be made based on that outcome.

However, the shock election result, the forced watering down of the contents of a Queen’s Speech and the protracted negotiations with the DUP casting further doubt about the government’s ability to get legislation passed, a further fortnight of “umming and ahhing” ensued.

And now, even with the confidence & supply deal agreed, clarity is still not a given with chancellor Philip Hammond, foreign secretary Boris Johnson and Brexit secretary David Davis all appearing to say slightly different things on the transition arrangements.

So for our businesses (faced with the impossible task of planning for a Brexit that the government doesn’t appear to have a plan for) it might make for a refreshing diversion to park the subject briefly and look at how both main parties view the country’s employers.

Does size matter?

It would certainly appear so with the Labour Party manifesto claim that it is now the party of small business with a range of measures aimed to protect them from the perceived bully boy corporates.

Corporation tax, due to fall to the lowest rate of any developed economy by 2020, historically had a two tier rate with a lower rate for businesses making profits of less than £350,000. This separate system was abolished in 2015 and whilst the Conservatives argue that this low level across the board will greatly boost investment into the UK the Labour party view it as another big boost to the large corporates and a bias against smaller businesses.

At a speech to the FSB back in April Jeremy Corbyn argued that although all businesses will be paying less, smaller businesses would be paying less less.

Fat cat pay packets

The approach to the subject of whopping salaries and bonuses paid to top executives is covered by both parties but as you would expect one falls slightly shorter on dealing with the issue than the other.

The Conservative manifesto admits that “the public is rightly affronted by the remuneration of some corporate leaders” and goes on to highlight the fact that senior corporate pay has risen far faster than corporate performance, with the gap between those paid most and those paid least growing from 47:1 in 1998 to 128:1 in 2015.

Their promise is to make executive pay packages subject to strict annual votes by shareholders and listed companies will have to publish the ratio of executive pay to broader UK workforce pay.

Companies will also have to explain their pay policies, particularly complex incentive schemes, better.

The Labour solution is clearer in terms of numbers and aims to disincentivise excessive pay by charging a 2.5% levy on earnings above £330,000 and 5% for any above £500,000.

Board in union

The thorny issue of workers’ rights and representation again falls roughly down the lines one would expect from the left and right of the political spectrum. It will no doubt amuse some that although the Conservatives have had a long held desire to crush the power of the unions their manifesto pledges to “ensure employees’ interests are represented at board level”.

So much so that they will “change the law to ensure that listed companies will be required either to nominate a director from the workforce, create a formal employee advisory council or assign specific responsibility for employee representation to a designated non-executive director”.

On the left of the equation there are several points that both large and small businesses will view with caution whilst most of those on the shop floor will be cheering loudly for.

Apart from the creation of a Ministry of Labour to deliver investment in enforcing workers' rights and a repeal of theTrade Union Act, the Labour Party pledge to outlaw zero hours contracts and ban unpaid internships.

As for the effect on the payroll a Labour government would reward workers with a rise in the minimum wage to at least £10 an hour by 2020 and introduce four new public holidays to mark patron saints' days.

You may have heard this before

It will come as no surprise that both Conservative and Labour manifestos pledge to crack down on late payments. In particular the cross party consensus continues to be that smaller companies cannot be bullied by larger customers treating them as a bank.

Unfortunately we have heard this sabre rattling regularly since the credit crunch with no real effect on payment behaviour. Naming and shaming along the Prompt Payment Code all sound helpful but it’s very difficult to force businesses into breaking the habits of a lifetime. Let’s face it, no matter how many dreadful pictures and warnings are placed on a packet of cigarettes the committed smoker will puff away regardless.

Why bother?

It may seem a pointless exercise to look at both manifestos now given that we do have a government in place and in place theoretically for another five years. However, the mood of the moment and the use of social media to spread views and highlight perceived unfairness could easily turn that theory on its head.

Be prepared to mark your cross sooner than 2022, and when invited do have a read through the manifestos. If for nothing else it’s worth it just to see what gets quietly dropped from the Queens Speech a few days later.

Steve Leeves