General election: what Labour’s win means for small businesses

Sir Keir Starmer and the Labour Party have won 412 seats in a landslide general election victory. A new government comes after 14 consecutive years of Conservative leadership.

Rising costs and inflation, increased taxes and regulation, and reduced consumer spending have defined the last few years for small business owners. 

Before the election, we surveyed 1,750 SMEs to find out what they hoped the next government would deliver to help tackle these issues. They called for urgent support in a number of areas, such as tax relief, regulatory simplification, and increased financial support. 

Now we know which party is coming into power, we examine their promises against the needs of the nation’s small businesses. 

What do small businesses want from the new government? 

In our Small Business Manifesto, SMEs from across the UK made their priorities clear. Their eight main demands for the next government are to: 

1. Reduce the tax burden – simplify the tax system and increase the personal allowance on income tax

2. Increase the VAT threshold to £100,000

3. Do more to tackle the energy crisis – apply tighter governance to the industry and help small businesses with their energy bills 

4. Prioritise investment in small business – reduce red tape and make it easier to access grants and loans 

5. Bring the British high street back to life – invest in local infrastructure so city centres are attractive to shoppers again, and review the business rates system

6. Tackle the £32 billion late payment crisis  – provide small businesses with the necessary guidance and financial support

7. Help SMEs to adopt environmentally-friendly practices – offer tax breaks or subsidies to businesses that invest in sustainable technologies

8. Prioritise the mental health of the self-employed – introduce a flexible statutory sick pay scheme and mental health support specifically for small business owners

Read the full report here. 

“The new government needs to set the tone for their leadership, and small businesses can be a catalyst for change in the wider economy,” said Bea Montoya, COO at Simply Business UK. “Our research shows that, if provided the right economic conditions, small businesses would create over one and a half million new jobs. De-prioritising this enterprising community would be a missed opportunity for the government, and we hope that the new leaders can deliver on their proposals.”

“Small businesses have been in a state of limbo throughout the campaigning period, and now is the time for Labour to double down and get to work on promises made in their manifesto.”

Will Labour respond to the hopes of SMEs and bring about the necessary change to support their growth? 

What is Labour promising small businesses?

While we can’t tell for sure what a Labour government will deliver for small businesses, their manifesto sets out several key points. 

Find out what the Labour Party is promising when it comes to: 

• tax changes 
• skills shortages
• worker’s rights 
• innovation
• startup growth 
• late payments
• business rates 
• small business exports 
• construction
• energy bills 
• public contracts

No tax changes

Labour have stated they have no plans to increase taxes on working people. They’ve said not to expect increases to National Insurance contributions, as well as basic, higher, or additional rates of income tax, and VAT.

They do, however, plan to cap corporation tax at 25 per cent. This could support small business growth through the ability to deduct capital investments.

Speaking of tax, Labour plans to ‘modernise’ HMRC in order to tackle tax avoidance. This will involve further increasing reporting requirements, as well as investing in new technology to increase their capacity. The overall goal here is to close the tax gap, which will better support the economy.

Addressing the skills shortage

Labour plan to solve the skills shortage by providing more training opportunities. One of their actions is to replace the current Apprenticeship Levy with a Growth and Skills Levy. They hope this will allow small businesses more flexibility in how they train their workforce – as well as access to a more skilled labour pool.

Another way they hope to address the skills shortage is through turning educational colleges into ‘technical excellence colleges’. This will align vocational training with the needs of businesses. In turn, they say this will create new job opportunities within local communities.

Improving workers’ rights

The Labour Manifesto lays out plans to remove zero-hour contracts and ban fire-and-rehire practices. This is alongside introducing a genuine living wage. These changes should raise employee satisfaction and productivity, which could lead to a more stable workforce for small businesses.

Growth and innovation

Labour plans to give more economic powers to regional leaders, as well as establishing local employment systems. For small businesses, this could make it easier to grow in the local market.

They also propose creating more stable R&D tax credits, as well as a new Regulatory Innovation Office, which could provide more funding opportunities for small businesses in the technology and innovation sectors.

And with 43 per cent of small business owners we spoke to believing it should be easier to access funding and grants, this could be a popular move.

Supporting startup growth

Labour plan to make it easier for small businesses to access funding and investment. They want to achieve this by giving the British Business Bank a stronger mandate for investing in small businesses outside of London. 

And by making changes to the Enterprise Investment Scheme and Seed Enterprise Investment Scheme, they say this will make them more effective at helping early-stage businesses.

Labour also wants to create a ‘Scale-Up Taskforce’ made up of government officials, academics, and industry professionals. They say they’ll focus on improving the policies that are currently acting as barriers to business growth.

‘Stamping out’ late payments

We know that late payments are a consistent issue for small businesses, so it’s no surprise that Labour have made solving the issue a priority. Labour plans to “introduce tough new laws to stamp out late payments and make sure more money gets to high street firms.”

To reduce the amount of late payments, Labour say they would make “big businesses report on their company’s payment practices in their annual reports” in an attempt to make larger companies more accountable and make sure that small businesses and the self-employed are paid on time.

This echoes the thoughts of the public, as 39 per cent of the small business owners we surveyed stated that the government should provide more guidance and financial support to those who are struggling with late payments.

Scrapping the business rates system

Labour is planning to replace business rates with a new system which ‘balances the burden and levels the playing field between our high streets and online giants’.

Labour say their plan will fill empty stores, encourage entrepreneurship, and incentivise small business investment, while reducing their tax burden.

Supporting small business exports

Improving the UK’s trade deficit and export performance is another priority for Labour. Since Brexit, small businesses have seen an increase in export fees and disrupted supply chains.

To try and change this, Labour are looking to remove some of the barriers associated with importing and exporting goods from the UK, by working with the EU to make things run more efficiently.

The goal is to expand these markets for British export businesses, while shaping new regulatory frameworks.

Labour say they’ll work with the Federation of Small Business to create a small business export taskforce, identifying practical methods for simplifying the process and providing the appropriate level of guidance for businesses.

Rejuvenating construction

Shortages in materials and skilled workers led to a slowdown in the construction sector in the last year. Labour’s strategy for turning this around is to:

• build 1.5 million new homes, creating opportunities for small builders and tradespeople
• strengthen planning capacity by hiring more than 300 new planners across the public sector
• reduce red tape in the current building planning system

Brian Berry, Chief Executive of the Federation of Master Builders (FMB), said it’s “a good idea to promote regional growth and deliver new homes, but it’s essential that local builders are part of this process. By bringing SMEs on board with new town development this will ensure high quality and diverse housing is delivered, while also creating wider benefits, like vocational skills opportunities.”

Preventing a future energy bill crisis

After small business energy bills rose to unprecedented levels, Labour have explained how they plan to stop it from happening again. This includes:

• investing in clean and renewable energy through their Green Prosperity Plan, providing small businesses with low-cost energy
• supporting British manufacturers so they can compete with their European equivalents
• investing in energy saving measures like loft insulation
• establish Great British Energy, a public entity focused on lowering costs

Making public contracts more accessible

According to Labour, billions of pounds are spent on public sector procurement each year. They estimate that £30 billion could be ring fenced specifically for SMEs.

Labour are looking to introduce a National Procurement Plan which would give small businesses a fairer chance at winning public contracts. At least one SME would be shortlisted for each suitable contract, and they plan to reduce the red tape in the bidding process in order to level the playing field for small business owners. 

New government election: key dates for businesses to look out for

As SMEs look beyond July’s election, many are feeling positive about the future – 47 per cent say a change in government makes them more hopeful about the future of their business. 

We’ll begin to get more clarity about a Labour government’s impact on small businesses when parliament opens once more in mid-July. The King’s Speech, which is happening on 17 July, could set the tone for what we can expect from the government going forward. 

Perhaps the first telling moment will be the party’s first Budget this autumn, which will set out key financial policies for 2025. 

Over a third (38 per cent) of the small businesses we surveyed believed that Labour was the party most likely to support their interests. Delivering on these hopes will be hugely beneficial for the next government, as SMEs play a pivotal role in  the UK economy.