Like most entrepreneurs, I love my business and I want to grow it. It would seem, from all the government’s powerful rhetoric, that David Cameron loves my business, too.
After all, the official line is that this is the year that the government needs to unlock the creativity and entrepreneurial talent that is buried deep in many of us and make Britain the best place to start, finance and grow a business.
As an entrepreneur, I can honestly say that I wasn’t sitting here waiting for this announcement before leaping into action. On the contrary, I and my entrepreneurial compatriots are working hard to expand our businesses here and abroad. What we need from government, to help us deliver more growth and jobs for the UK, are several commonsense changes to employment law and lower taxes on job creation.
George Osborne started well by increasing
the rate of income tax relief for the Enterprise Investment Scheme (EIS) to 30% to encourage investment from the friends, family and business angels that so many high-growth businesses rely on in their early years; he has plans to double the investor limits to £1m per year from April; and has extended the entrepreneur relief to £10m. All welcome.
Going beyond the rhetoric
Beyond this though, the coalition needs to realise that the warm words that may help convince the public that there is a plan for growth, just don’t cut it with business owners. Entrepreneurs don’t need to hear any more from politicians about ‘exporting more’, ‘working harder’, ‘risking more’. If the people behind the start-ups didn’t have this drive and ambition; they wouldn’t have founded a business in the first place. What they need is bold and decisive leadership from those in power to help where they can.
Take, as the leading (cost-free to the taxpayer) example – the state of the suffocating employment laws surrounding recruitment and dismissal. With simple changes – that would cost the tax payer nothing – the prime minister could alleviate the expensive and stressful administrative burdens that seriously affect start-ups’ room for growth. Of course employees need protection from unscrupulous employers, but the pendulum has swung too far to effectively favour vexatious claims from employees.
Currently, the risks that are faced by business owners when trying to comply with HR legislation represent one of the deepest
money pits and biggest cause for emotional distress and distraction.
The Forum of Private Business estimates that a typical small business spends 34 hours a month cutting through it and an estimated £1.4bon is spent on advice from consultants to avoid it – a cost that few SMEs can afford.
When speaking with MPs, ministers and shadow ministers about this, they seem afraid, unwilling or unsure about tackling the problem. They seem too fearful to shake up laws that are so heavily embedded in European legislation, or just not confident enough that they can win support for the changes. If now isn’t the time to change the European law, while the continent is going through an employment crisis, when is?
Instead, they construct policies like the ‘
no-fault dismissal process’, proposed by venture capitalist, Adrian Beecroft, that, while helpful, only go so far in relieving the pressure for small enterprises.
The loop holes surrounding this policy wouldn’t prevent employees laid-off through the process from claiming unfair dismissal through discrimination, a claim underpinned by European legislation.
The big solution to small business problems
The government should introduce a cap that would limit the amount the employer ultimately pays out, businesses must be able to calculate exactly the risk and impact of managing an ex-employee pushing to extort a maximum pay out.
Another sensible step would be a small, mandatory deposit paid by the individual making the claim in case of loss, so that the claimant has some risk to discourage claims by chancers. These measures would help entrepreneurs sleep at night without vexatious claims annihilating the positives of running your own venture. A nation focused on climbing out of recession should want its business leaders waking up excited with ideas about business expansion, innovative new products, not depressed with an undeserved, costly threat of a tribunal hearing.
A major reason my stepfather, a fast-food entrepreneur in the 1970s, gave up job creation and became a school teacher instead was to avoid the strain of the restrictive laws around employment. When I set up Ten Group, he told me to enjoy the autonomy and passion that comes with setting up your own venture. But he also said to me, “Alex, do yourself a favour and never employ anyone”. While that’s not practical in my company, where my 350 staff are so vital to our service as a lifestyle concierge provider, I can certainly appreciate what he meant. The law as it stands makes employing people far riskier and less rewarding than it should.
Another simple, albeit expensive, change Cameron can make to encourage wealth and job creation is to lower employer national insurance rates. Besides it being nonsensical to charge companies for employing people, the current rate of 13.8% is strangling many established enterprises, let alone new ventures. Will this proposal be dismissed as too expensive or is it the big idea to kick-start a jobs-led recovery? I’m not sure the many billions spent on QE would not be better directly spent on job creation.
An entrepreneur needs assurances that their enterprise will be working in an environment where the laws reflect a true understanding of the needs of wealth and job creators. While the politicians’ rhetoric may persuade the public that the government is introducing firm measures for business growth, entrepreneurs don’t tune into the BBC Parliament channel to get their inspiration from the warm words of encouragement which are being used to fill the gap left by the lack of a serious plan for growth.
Alex Cheatle is the founder and CEO of Ten Group, the lifestyle and home management company he started in 1998. The company was a winner of the Service Business of the Year title at the Fast Growth Business Awards in 2008 and has offices in London, New York, Hong Kong, Miami and San Francisco.