FINANCE
From late payment to getting tough on the High Street- will the Small Business Plan become a reality? by Fiona Scott
Out of the blue, at the end of July, Prime Minister Keir Starmer arrived in the South West to launch his Government’ s Small Business Plan.
Behind the scenes for months, the Labour Government has been meeting representatives of the small business sector to get a handle on the issues facing us all. The document is said to be the start of some major changes to help the small business sector.
This unexpected turn of events also coincided with an interview a few days before with the new Small Business Commissioner, Emma Jones. Unsurprisingly, the subjects for discussion dovetailed, especially when talking about late payment and the challenges facing those on the High Street.
A key message in the Small Business Plan comes around clamping down on late payments, which result in losses of up to £ 11 billion to the economy every year. According to the document, 38 businesses go under every day due to cashflow issues. Keir Starmer believes a mere one per cent rise in performance from SMEs could be transformational, not only for the sector but for the country.
He said,“ This plan will address some key issues as well as help our SME sector to grow. It’ s‘ your’ plan and it’ s not a plan drawn up by civil servants in Whitehall. It’ s a plan designed and shaped by small business owners who have shared with us the challenges you face.”
The plan sets out some bold promises and claims to be the most significant legislation to tackle late payments in over 25 years, giving the UK the strongest legal framework on late payment in the G7. This includes:
Enhanced powers of the Small Business Commissioner to take action against persistent late payers
Stricter maximum payment terms Mandatory payment of interest on late payments Fines for large companies which persistently pay late
Possible introduction of payment performance data to be included in company accounts and reporting for larger companies
Spot checks on public sector organisations to monitor payment practice
Tighter rules to exclude suppliers which fail to pay promptly on large contracts
It’ s not entirely clear yet though what the plan means by‘ large’ companies, as many small businesses are actually owed money by other small businesses. Equally the definition of an SME is one to 250 employees – a very broad range. The devil will truly be in the detail.
It was a question I had put to the new Small Business Commissioner Emma Jones a few days before. What is a‘ large’ business?
“ Our definition of a large company is a company with 50 plus employees. We cannot get involved when it’ s an issue between two smaller businesses and a big part of the reason for that is if two small businesses are having issues paying each other, the resolution of that is going to damage one of the businesses.
“ So there was a consensus that actually our role in this is to help small businesses get paid by those who are able to pay them where we don’ t have to make judgments or to create harm to one of the businesses.”
As for having any teeth to truly bring bad payers to task, Emma said she was waiting for the consultation to be made public – and now we know.
“ This role is both about stick and carrot. And I’ ve always been a person who would rather use a motivational incentive as opposed to fines or investigations. However, at the end of the day, there are maybe some businesses where, if it’ s repeat bad behaviour, they just won’ t respond to the current approach, and so you need that stick.
“ For the time that I’ ve been in this role so far, when complaints have come into the office and we have then approached the company against which the complaint has been made most of the time, 9 out of 10 times it is down to processes not quite working as to why the payments weren’ t made. It wasn’ t an intent not to pay.”
It will now be down to the business plan to see if Emma and her team will be required to‘ beef’ up the action they take against poor payers.
What about the High Street? The High Street also forms part of the Small Business Plan – a subject we’ ve touched on many times at TBE. Footfall has fallen since the pandemic by over 12 % and many hospitality businesses such as pubs, nightclubs, restaurants and cafes have been lost. The challenge of online shopping is not going away.
The plan sets out that relevant small businesses should be involved in any community plan to improve the High Street. This plan says it will:
Create a new National Licensing Framework to reduce the burden of licensing regimes, onerous conditions and inspections, which often affect hospitality
Provide cash for 350 banking hubs and ensure a Post Office network is secure
Encourage the use of High Street Rental Auctions to prevent landlords from keeping properties empty, as well as the creation of a new Community Right To Buy
Bring forward lower business rates permanently based on a multiplier for properties with rateable values below £ 500,000
Ban the use of‘ Upwards Only Rent Review’ clauses in commercial contracts
Explore the role that cooperatives and CICs could be playing
The plan offers a case study of a CIC which is, interestingly enough, one where the Small Business Commissioner plays a personal role too – Ramsgate Space.
Emma explained,“ This doesn’ t come into my day job remit, but it very much comes into my post-curricular activity. I’ m a non-exec Director of a community interest company in Ramsgate, Kent, called Ramsgate Space, which was set up to regenerate the High Street.
“ In Ramsgate, 45 % of the shops are empty. Not all of those empty shops are actually currently being marketed as empty sites.
“ Instead, the issue can be so-called‘ land banking’. This is where landlords hold on to their sites, and it may be more beneficial for them to keep them empty. One thing that needs to be addressed is how do we encourage landlords to see the benefits of filling their spaces with activity?
“ I’ ve been running business support events in Ramsgate for local people who are thinking of opening delis, fashion shops, maker spaces, and they have an incredible array of entrepreneurial ideas.
“ But if you are just starting out, you’ re nervous about taking on a full-time site with business rates and rents and all that it entails. I’ m a big believer in doing pop-up shops first. Start with test trading, potentially share space with other businesses that are similar to your own.
“ I think it’ s useful for small businesses to be aware of High Street Rental Auctions which is a new piece of law that says if a shop has been empty for more than 12 months, the community can take ownership of that shop, though you have to involve your local council in this transaction.
“ Ramsgate Space has been up and running for just under 12 months. We’ ve got lots more work to do, but I’ ve definitely seen from that experience that change must be absolutely community-rooted. If the community comes together and says‘ right, let’ s fill these shops, let’ s contact the landlords, let’ s clean up the High Street, let’ s support small businesses looking to go in them’- that can be part of the solution to get life back and we can enjoy buzzing High Streets again.”
Allison Herbert, Chief Executive of Bath BID Company, has welcomed support for the high street.
She said,“ Bath continues to outperform many other high street locations with footfall for 2024 at only 3 % down on 2019. The city has very few vacant units and a waiting list of potential occupiers.
“ However, the environment for businesses in Bath continues to be challenging, rents and rates are very high. A review of high street business rates is long overdue and anything which addresses that burden for our bricks and mortar businesses is welcome.
“ We are fortunate in Bath that our large Debenhams store has found a new occupier, however we are now waiting to see what could go into the soon to be vacant Marks and Spencer’ s store which is extremely large. It would be exciting to see a shared use in that location, so that the financial risks could be shared by multiple occupiers. We are waiting to hear about a future use for this space, but it would be a really positive injection of creativity if we could see a scheme like Ramsgate Space, Sparks Bristol or Bradford’ s Darley St Market on Bath’ s High Street.”
Councillor Kevin Guy, B & NES Council Leader, said that the Council is committed to supporting small businesses, which account for 98 % of our enterprises within the district.
He added,“ Our Universal Business Support service provides free assistance to small businesses, regardless of their sector or personal circumstances. We work with business owners to direct them to the right finance, networks and premises to help them thrive and grow. We’ re also tackling the issue of empty shops through the Vacant Units Action Project- bringing spaces back into use across our area and supporting pop-up uses that boost footfall and confidence.”
As for the Small Business Plan the clock is ticking …
6 www. tbebathandsomerset. co. uk