How politicians can support Britain’s fast-growth businesses

The UK is undoubtedly a great place to start and grow a business

Politicians of all stripes talk a good sound bite when claiming to support British businesses – but talk, unlike running a company, is cheap. As the election approaches and manifestos are released, we will soon be able to assess which party truly backs Britain’s growing band of entrepreneurs.

The UK is undoubtedly a great place to start and grow a business. We are not eighth in the World Bank’s Ease of Doing Business league table for nothing – our economy is stable and our markets relatively deregulated. And the coalition government has been modestly successful, particularly in strengthening the protection for small businesses.

We have been world leaders in the service industry for a while, but as the spectrum of companies in The Leap 100 attests, Britain has exciting businesses across all sectors and industries. When it comes to the all-important tech sector, though the US and Israel were out of the starting blocks before us, we are hot on their heels, and our flourishing fintech firms are now building a healthy lead on the competition.

There is, however, room for improvement. Corporate taxes have come down, but politicians still need to convince entrepreneurs that Britain has a stable and favourable regime for individual taxation at a time when tax transparency is also a hot topic. Entrepreneurs’ Relief reduces the tax on gains to the lower 10 per cent rate. The next government should widen its remit. For example, it could be extended to all shareholder employees by scrapping the 5 per cent shareholder requirement (as has now been done where shares are acquired under an Enterprise Management Incentive (EMI) share option scheme).

There is uncertainty over the future of Employee Shareholder Shares (ESS), whereby employees can benefit from a complete exemption from capital gains tax on gains on shares worth between £2,000 and £50,000 on acquisition, if they are prepared to give up some of their employment rights. Take-up was slow for the first 12 months, but we are now seeing a rise in their popularity. Labour has pledged to scrap ESS if it comes into power, so we are encouraging people to take advantage of this before the election.

Fine-tuning existing policies could make a huge difference. Perhaps most importantly, the Enterprise Investment Scheme (EIS) could be simplified by scrapping or shortening the requirement that investors meet the qualifying criteria throughout a three-year period, rather than on day one of taking it up.

Of course, governments can only do so much to help entrepreneurs – but history attests that they can do an awful lot of harm. Small and medium-sized enterprises (SMEs) account for over 99 per cent of private sector businesses in the UK, and policies in the manifestos will impact how many of these will be able to scale into world-beating firms. Thankfully, the calibre of The Leap 100 companies is a sign that we are not too far off track.

This article first appeared in City A.M. on Thursday 26th February 2015. You can view the article on the City A.M. website here.

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