The tech industry has generally welcomed the pledges outlined in the Conservative Party’s Small Business Manifesto yesterday, but startup execs are urging a new government to review corporation tax regulations and business rates, along with encouraging banks to lend to fledgling firms.
“Cutting corporation tax only benefits big businesses already in profit,” Olivia Knight, founder of gift-splitting startup Patchwork Present. “What we need is the opposite. Tax cuts for companies starting out, before they are in profit and when they really need the help. When it comes to business this government have got it’s priorities the wrong way around.”
Pointing to plans to ‘review business rates’, she added: “I would like to see National Insurance and other business taxes entirely removed for SMEs until they reach profit. Then I think NI, business rates and corporation tax should all kick in. Perhaps alongside a capital gains tax on profits.”
Echoing this, Zoe Peden, CEO of Insane Logic, a VC-backed startup, said: “I personally would be delighted to see a review of business rates. We’ve been very fortunate to set up office in Southwark where they have suspended business rates for small businesses like ours with an office below a certain size. This has helped us enormously when I compare what my startup friends pay in Shoreditch.”
Among other pledges, David Cameron said that the Conservative Party would ensure 600,000 startups were being created every year in the UK by 2020, not terrifically ambitious as 2014 already saw a record 581,173 new firms registering with Companies House in the UK. And given that as many as half of UK startups fail within the first five years, quality over quantity may have been a better thing for the PM to emphasise.
“My sense is that a lot of focus is being put on startups at the moment,” said Olivia Sibony, cofounder of Grub Club. “This is great, but it’s important to think about the sustainability of these businesses.It’s of little use to support a lot of startups if they’re not genuinely good businesses that will have a chance to survive in the longer term.
“Scaleup is the stage at which businesses are able to better contribute to the economy as they have more cash in the bank, which means more money to employ more employees sustainably, creating more secure employment, paying more tax. So I’d see the argument better geared towards helping fewer small businesses start but giving them more long-term support to have a really meaningful impact all round.”
Knight thinks more could be done to encourage investment, particularly from the more traditional players. “Although schemes like the Enterprise Investment Scheme helped us, not all startups are so fortunate in finding investment and banks quite simply need to start lending to startups.”
She also says a commitment to ‘cut red tape by £10bn’ is a red herring. “Governments always talk about cutting red tape as if it is a huge hindrance to small businesses when it’s really multi-nationals who tend to benefit from deregulation.”
The manifesto was accompanied by a letter of support from ‘5,000 small business owners’ sent to the Telegraph, which was quickly found to contain inaccurate information, but was written in a clear bid to woo the legions of floating voters yet to make up their minds on next week’s vote.
This may all be wasted column inches, given that US ‘rock star’ statistician Nate Silver told the BBC’s Panorama that the election is too close to call, but admitted that the largest coalition would only be able to be formed by the Labour Party, rather than the Conservatives.
See the full manifesto here, which includes a review for self-employed workers, a pledge on startup loans and a target on government procurement for small firms. The document also commits to superfast broadband for 95% of the country, along with basic mobile coverage for 90%, by 2017.