Monday, 28 March 2011

How open for business is Britain?

Today, with great fanfare, a new "Start Up Britain" campaign is launched:

Prime Minister David Cameron is launching a new private-sector business initiative today called Start Up Britain. It is aimed at encouraging people to set up their own businesses and will be a major part of the governments attempt to encourage economic growth through private enterprise. New businesses will be able to apply for help worth around £1,500 in areas such as internet advertising and IT training.

And the Government has roped in some big businesses - mostly those with a real interest in small business that extends to wanting to sell something to these new businesses!

O2, Virgin, Blackberry, Google, Experian, Barclays and AXA - all signed up and ready! Ready to sell mobile phone services, credit checking, insurance, banking and technology hardware. Not much in the way of philanthropy here - just some big businesses scamming government for a few nice sales opportunities.

And let me tell what the problem is for small businesses - it isn't the cost of IT training or the expense of internet advertising, it's the endless barriers to getting going. Here are a few examples:

Try setting up a bank account. You thought you just walked into the bank with some cash, filled out the forms and bingo, a shiny new bank account! Nope, you need the forms, photo ID, a meeting with a "business advisor" and evidence that the business is established. And if you try to open the account with a grand in cash there's a further pile of questions and forms related to money laundering and heaven knows what else

Then you'll need some insurance. Pretty easy to obtain and you have to have it even if you're only employing yourself. And if you're planning to bid for public contracts there's a whole load more rules - you'll need to spend at least a grand on assorted insurances.

Now find an angel investor. Ah, problem here. The investor will want equity - that's how it works. And regardless of how you and he choose to structure the equity, it has a load of negative tax implications for that investor. Change it to a loan? Oh no, the tax man's wise to that and will still nobble the investor.

So it's a loan from the bank? For a start up business, who're you trying to kid! The banks won't be taking that risk any time soon - unless of course you want a loan on crap terms that the bank insist on treating like a personal loan? Limited liability - that's a laugh isn't it!

I could go on - talk about VAT, about business rates (watch out for double taxation when you work from home), reporting rules, accountancy fees and a host of regulations specific to different types of business. And this is before we get to the burden of actually employing people - you know the "creating jobs" bit! That opens up a whole load more costs and rules - national insurance, PAYE, assorted employee rights (maternity, paternity, sick pay, holidays and so forth).

As my old boss, Judith Donovan put it in commenting prior to the recent budget:

“I passionately believe SMEs are the engines of growth; this Government so far is paying lip service to that concept while cuddling up to big business; we don’t need schemes and incentives and special favours.

“Yorkshire folk will do it for themselves if given a level playing field; lift the ridiculous and onerous employment law burdens for businesses employing under 10 people and the Yorkshire economy will fly; I should know. I built an SME to over £10m turnover and I sold because of these appalling laws and I would never start another business while they persist.”

Setting up a business is a pain - sometimes it's the only option but no-one enjoys it, there are huge bureaucratic barriers and costs before you can do anything, let alone start making some money!

There are plenty of people who would love to start a business. They don't bother because, right now, the cards are stacked up against the start up - regulation, tax, more regulation, more tax, controls, dictats, instructions, all things of no point, value or purpose to the businessman or woman.

That's what has to change - not lending us a tenner and getting Google to provide some second rate IT training.



Dan said...

Its a nightmare when trying to start a business. .

I have a small website that I'm using to make money from affiliate programs. My question to you is, even though I haven't made any money on this so far, when will I have to start paying these rateS?

Simon Cooke said...

@Dan ...from valauation office:

If you work at or from home, the part of the property used for work may be liable to business rates (also known as non-domestic rates) whilst the remainder of the property will continue to be liable to council tax (although an alteration may be made to its banding).

To decide whether or not part of your property should be liable to business rates there are a number of things we have to consider, including the extent and frequency of the non-domestic (business) use of the room (or rooms) and any modifications made to the property to accommodate that use.

Each case is considered on its own merits, and normally we will visit your property to check the facts before an assessment is made for non-domestic rates.