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A new focus on small business in 2012

    In the fifth of the CPS' 'UK Policy Resolutions for 2012' series, Charlie Elphicke, Conservative MP for Dover, explores how the Government can make life easier for SMEs in 2012. Yesterday, in the fourth in the series, CPS Head of Economic Research Ryan Bourne looked at how the Government could plot out a path for sustainable budgets.

    UK Policy Resolutions for 2012:

    • Expand and float the Business Growth Fund
    • Simpler tax reporting requirements
    • Cut corporation tax to 15 per cent
    • Support SMEs through export guarantees and by beefing up UKTI

    Why does Government pander to big business? It makes no sense when 13.6m people work in Small and medium sized enterprises (SMEs) with up to 250 employees. That’s 6 out of 10 private sector workers. Big business accounts for 9.2m jobs -- 4 out of 10 of UK private sector workers.

    SMEs don’t just employ 50% more people than big business. They have been the UK job creators, responsible for 1 million more jobs since 2001. Meanwhile, big business employment has fallen by 1 million over the same period. As SMEs are the majority of the jobs and the job creators we need to back them with greater energy to make Britain stronger.

    These are difficult times for all businesses. Yet most especially SMEs. SMEs are most likely to drive UK growth over the next five to ten years. So we should back them to the hilt if we want to maximise jobs and money for our people. Much has already been done, but there is much more to do. We should be prepared to be radical when it comes to supporting SMEs and supporting economic growth.



    The Government ought to take a more radical approach to helping SMEs expand. Credit easing is a major step forward. Yet the £2.5Bn Business Growth Fund that was part of the Project Merlin agreement with the banks should be expanded. It could be floated, attract more institutional investment to the faster growing SME sector and be leveraged to provide a fund in excess of £20Bn. That would greatly help get SMEs the finance they need for expansion.

    SMEs constantly complain about the weight of regulation that affects them. So why not exempt them from a whole raft of regulations? Employment law could be relaxed for SMEs as it was in the 1990s. So too could many other regulations. Simpler tax reporting requirements, a reduction in the rate of corporation tax to 15%, lighter touch company law and many other areas of regulation could be simplified for SMEs.

    Government often likes to blame EU law for excessive regulation. Yet there are in fact many relaxations for SMEs and the UK should do more to take advantage of them while we are in the EU. Many block exemptions to EU regulations have been created as it has dawned on the EU that SMEs are the job creators and best placed to drive expansion out of the economic downturn.

    SMEs are less effective at exporting. They cannot afford big sales departments with an emphasis on exports. Yet the UK has a network of embassies and trade representatives. Bigger businesses can largely manage exports on their own. So a new focus on support for SMEs in export guarantees and from UK Trade and Investment to help boost exports to faster growing countries far from the EU would help drive expansion. SMEs could drive growth of the basis of the Government’s international embassy network.


    Charlie Elphicke MP is the Conservative MP for Dover and Deal and previously worked as a tax lawyer and ran a small business. He is a Research Fellow at the Centre for Policy Studies and in 2011 co-authored ‘Growth, Growth, Growth: New Ideas for Growth and Prosperity in the 21st Century’ with five other Conservative MPs of the 2010 intake.

    This article represents the views of the author only and does not necessarily represent the policy outlook of the Centre for Policy Studies, its board, staff or affiliated members.


    Charlie Elphicke is the Member of Parliament for Dover and Deal. CPS papers authored by Charlie include Ending Pensioner Poverty (2003); SAINTS can get Britain saving again(2005); with William Norton, The Case for Reducing Business Taxes (2006);

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