What's the missing policy piece to drive forward small business growth in 2024?
Small firms sees wage bills surge
Many small business leaders entered 2024 with some trepidation.
Despite the customary air of hope that typically accompanies the start of a new year, the UK Insolvency Service reported a 30-year high in the number of business insolvencies from the previous year. Elsewhere, industry reports1 highlighted a business environment of UK firms facing significant ‘financial distress’ – with those in London the most impacted by high interest rates, inflation, skills shortages and escalating material costs.
In the face of these challenges, the prospect of running a successful business could have seemed increasingly precarious. Now several months on, there is reason for SME optimism. Business confidence is at a high, inflation inches closer to the Bank of England’s 2% target, and GDP figures reveal the economy could be back on track for growth.
Accounting for 99.9% of the nation’s business population, small businesses serve as the lifeblood of the economy, responsible for around three-fifths of employment and half of the turnover in the UK’s private sector with a third of this population alone operating from London and the South East2. More than just economic numbers, they are the embodiment of our country’s entrepreneurial spirit; driving innovation, job creation, and supporting the backbone of our national infrastructure.
Now, with the prospect of a general election looming, ensuring SMEs’ continued success while giving them the ability to take advantage of growth opportunities will require effective policy measures. So how can we ensure their success is realised?
Government initiatives such as the Recovery Loan Scheme (RLS) have already served a valuable purpose, giving SMEs access to a record £5.3bn to date. However business leaders are looking for consistency and continuity. The ‘Growth Guarantee Scheme’ announced in the Chancellor’s budget in March was yet another welcomed initiative, but with it due to come to an end in March 2026, this only gives SMEs another two years of ground to run on.
The need for comprehensive small business-first policy also goes beyond political affiliations. Regardless of the outcome of a general election, SMEs require assurance that their needs will be prioritised in policy making decisions. Recent proposals from the Labour Party3 for example, including measures to address £20bn of unpaid invoices and to streamline access to public contracts, address the importance of providing SMEs with the certainty needed to plan for the future. SME policy mustn’t be a bargaining chip, but a centrepiece of any government economic strategy.
Finally, addressing regional disparities in business support will be paramount. Operating a business in London presents its own set of challenges; our research finds that three-quarters (78%) of SMEs in the capital say that productivity is among their top business concerns, closely followed by rising operational costs (74%). SMEs in other regions also face their own unique obstacles as over half (56%)4 are unaware of the potential financial support available to their business, it’s therefore vital that we build a supportive funding framework to ensure their futures.
The path to driving forward small business growth in the UK hinges on addressing these missing policy pieces. Closing the SME funding gap, implementing a robust small business-first policy framework, and addressing regional disparities are essential steps in maintaining the resilience and success of the many SMEs, who contribute so greatly to the UK economy.
Through targeted and concerted policy efforts, we can empower SMEs to thrive in the face of adversity and contribute to the nation’s economic recovery and prosperity.
Richard Chadwick is chief risk officer at Simply Asset Finance
Register now for one of the Evening Standard’s newsletters. From a daily news briefing to Homes & Property insights, plus lifestyle, going out, offers and more. For the best stories in your inbox, click here.