Accountants BDO this week issued a report championing the mid sector of the British economy (termed as those entities with a Turnover of £10m – £300m). BDO’s manifesto clearly named thus as an attempt to influence political parties and their Policymaking in the run-up to May’s election, has a number of practical suggestions.
The report shows a slight bias towards Manufacturing, somewhat surprising as our discussions with companies in this sector leads us to believe that prosperity in such businesses is tied to finding and exploiting niche sub-sectors. This seems at odds with the type of scaling up required to take these businesses to the next level. However, some of BDO’s more useful ideas include;
- the reduction of employer’s NI for manufacturing firms, boosting the overall NI take by facilitating the creation of 20,000 new jobs
- and the provision of a zero rate of VAT for suppliers to exporting Manufacturers. Currently, HMRC allows for the zero-rating of front-line exporters but not for those in their supply chain as is the case in other EU jurisdictions such as the Republic of Ireland. Adopting this in the UK would confer a significant cashflow advantage to manufacturing suppliers.
- looking at the effectiveness of suppliers within the Government’s own supply chain. A huge opportunity exists under the Government’spresent plan to diversify its supplier base offering more of an opportunity for SMEs to operate contracts for the Government.
The Government has set itself the target of buying 25% of its goods and services from small businesses by May 2015. That equates to £65 billion of spend (See the recent Government statements below that outline the Government’s policy with these matters and their stated commitment to transfer a larger portion of Government spending to SME enterprises. Find out more.)
Clearly, the tide is turning towards greater acceptance of the contribution that SMEs make and could make to the economy. There is however a lack of obvious success stories coming from Growth companies in the UK compared with what is known in Germany as the Mittelstand, and the American model best seen through Nasdaq. Twitter, Facebook, Apple and others seem hardly to have stopped for breath with significant changes in business practices required to move forward seemingly taken so easily.
German business practices have many differences from those practices in the UK – a greater collective business ethic is seen in the workplace, businesses tend to be owned very much with the long term in mind and ownership of these companies is often kept within families. Many are owner managed rather than the Chief Executive seeking a swift profit model in the UK. The American success stories of recent years have had links to the education system there too with Facebook and Twitter both being set up by undergraduates.
All that said Lord Sainsbury, a former Labour minister and author of a book entitled Progressive Capitalism is less sure that following a German model is the way forward. “I don’t think you should try to copy countries that have a different kind of capitalism,” he told the Observer. “In terms of industrial democracy, for example, the role of trade associations and trade unions in Germany cannot be replicated in the UK. In German business negotiations, if employers or employees are being unreasonable, then their own umbrella body intervenes and makes sure a consensus is reached”
Here at Funding Guru, we don’t claim to have all of the answers regarding national economic development, but if you would like a free consultation regarding your Finance needs, including:
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- bridging finance to assist with Exporting/Importing
then please call 03330 069141 for a chat or request a call back from a member of our team!