A Plan to Save SMEs
I remember learning about Just in Time at college. It amazed me that the purchase of a carrot at a supermarket in Rotherham would immediately result in Jethro extracting its replacement from a field in Lincolnshire.
Bar codes, internet and more technological innovations fast tracked the implementation of Just in Time to most industries. Food suppliers, engineering, manufacturing all had their supply chains so perfect customer’s demands were met without delay. But what if, a tanker gets stuck in the Suez Canal, Putin goes to war, Brexiteers win or there is a worldwide pandemic. There was no what if. We were living in a world where supply and demand worked timelier than a Rolex watch. So why have a backup plan. Boats don’t get stuck anymore their tech won’t allow this happen, he daren’t invade, Brexit is good for the UK and don’t worry about viruses scientists will kill them off easy.
Corporate world became so arrogant that they had created an end-to-end delivery of goods, nothing could stop them. Contingency plans were discarded. SMEs followed suit, “if it’s ok for them, why not us too”
Large organisations have buying power, cash, strong balance sheets and influence which has strengthened in recent years. Because of this strength returning to past lead times and guaranteed delivery dates to customers is only achievable for global conglomerates.
What about SMEs? The pandemic has decimated their balance sheets, supply chains are ruined or dominated by corporates. So how does small business recover, compete again and survive. Increases in taxes, interest rates and inflation are harming them allowing larger business to grow, obtain greater market share and control pricing, squeezing the local trader.
Buying local is ideal but when it is cheaper and more convenient to have goods delivered to your door by international traders what chance does a family business have.
Whilst low corporate tax rates encourage business to our shores is this not ruining opportunities for the new start-up or those recovering from recent events. The argument has been that bringing the headquarters of international companies to the UK creates employment. From this employment taxes increase to help fund the government purse however with more jobs available in the UK than unemployed people shouldn’t there be action to encourage start-ups or the smaller business employing a few people to ensure prices remain affordable for the public.
Where entrepreneurs previously thrived, they are being forced into becoming a delivery driver or working at a call centre to earn enough to cover their mortgage and heating bill.
Local traders, entrepreneurs, school leavers dreaming of a small engineering business must be encouraged however there is no incentive from central or local governments. Start-up costs are prohibitive, working capital is expensive or unobtainable without security that only established operators have. A fairer playing field is needed. Access to grants and cheaper start-up funding must be made available.
Apply windfall tax to these giants shout many, however adding a levy on salary costs for larger employers and reducing Employers National Insurance on smaller organisations would help level up the imbalance of competition.
Businesses must register for VAT if their turnover is greater than £85,000 per annum. For a small retail enterprise VAT is a burden however if our Chancellor were to at least double the VAT registration limit it would allow owner managed cafes and shops to compete against the large chains and online businesses.
So, to rescue Just in Time for SMEs, give the next generation hope of being self-employed and building a business that survives that they can pass into their children, change is needed. Allow a start-up to flourish by increasing VAT registration to £200,000 and reduce Employers NI for those with less than 10 employees. Come on Mr Hunt give small business a chance in your March 2023 Budget. You know it makes sense, be brave, let the entrepreneurs dream again.
Mark Smallman, MD, Brearley & Co Accountants – A Plan to Save SMEs | Brearley & Co (brearleyandco.co.uk)