Research from The Federation of Small Businesses (FSB) reveals that Government policy has made it more expensive for UK SMEs located outside London.
The policy changes recently implemented by the Government have put a relatively larger burden on small businesses in Northern Ireland, Scotland and Wales than on those in London. The legislative changes that have caused this include the cost of taxes and regulation.
UK SMEs dealing with increased costs in devolved regions
The cost of the changes in every devolved region has gone up, while it has actually decreased slightly in the capital. The average UK SME has an annual cost of £481,000. While this is the same cost as 2018, it has increased by 14.5% compared with the £61,000 it cost in 2011.
Small businesses in Scotland are paying 14.7% more, 14.9% more in Northern Ireland and 15.25% more in Wales, because of the measures. These changes are shown in the annual Impact of Government Policy Index, which also reveals that the rise in London was 13.7%.
The index is currently measuring the highest ever, due to the rising business rates announced in the Autumn 2018 budget. Other Government policy changes in areas including insurance and pensions means that they outweigh any benefit from a reduction in corporation tax.
UK SMEs in construction sector most vulnerable
According to the research experts at the Centre for Economics and Business Research (CEBR) who compile the index, the way the economy is made up in the devolved regions explains the rise in costs.
The data shows that construction is under the most pressure, as it is dealing with a 28% rise in costs due to the policy changes. Rising wages and labour taxes mean that it’s the hardest hit sector in devolved areas. The costs of manufacturing actually rose by a fifth in just two years.
It’s also likely that the increase in minimum wage from £7.83 to £8.21/hr, is affecting these regions and sectors. Most workers in the capital already earn more than the threshold due to London weighting on salaries, so this also impacts the distribution of costs.
Fewer businesses in devolved regions
Another factor that has contributed to the marked difference in business costs is the sheer number of businesses in London. Devolved regions of the UK are home to far fewer companies than the capital. Per 10,000 people, London has 1,563 businesses. In Scotland, the number of businesses per 10,000 people is 735, in Northern Ireland 897 and in Wales 774.
The index has been compiled by CEBR since 2011, to measure the impact of Government policy on the average VAT-registered SME.
James Turner, Managing Director of Turner Little Limited says: “It seems clear from this report that the Government must do much more to support UK SMEs throughout the whole country. At the moment, the weighting in favour of small businesses in London is marked. As the country heads towards Brexit, there needs to be much more guidance and reassurance from the Government for small businesses, and particularly those in regions outside the capital.
“Small businesses in the UK increasingly form the backbone of the economy and, as such, need more support. If the country is going to thrive after Brexit, then work needs to be put in to shore up SMEs in all regions of the country.”
About Turner Little
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