Is starting a business still possible—or at least worth the effort—In the UK? Tax biases, Brexit, and the widening skills gap seem to make it more and more unprofitable as time goes by.
Only for the hardcore UK taxpayer
As of 2018, 99% of all businesses in the UK are small and medium enterprises (SMEs) at 5.7 million. Among these, 5.4 (that’s 96% of the total business count) are microbusinesses. Only 8,000 businesses in the UK are large businesses. However, SMEs perceive a great lack of support from Her Majesty’s government, according to a UK Chamber of Commerce survey. They say that SMEs believe there’s a tax bias that favours big businesses.
Specifically, there’s been a huge disparity between the dues of international megacorporations, such as Facebook and Amazon, and the taxes SMEs need to pay. Corporation tax for small and medium businesses rate at 21.7% as of 2016; corporations with more than £1-billion turnover have 20.1% corporation tax. In 2014, Facebook, a $500-billion corporation, only paid a measly £4,327 worth of corporation tax to HMRC.
Due to outdated taxing laws that go back to the 1900s, even the might of the British Empire isn’t enough to charge global tech firms huge taxes. The UK has become a tax haven for these tech moguls, making proper taxes only for the hardcore UK taxpayer.
SMEs and Brexit
In 2016, 17.4 million people voted for the UK to opt out of the European Union (EU). After almost three years, Brexit still hasn’t happened. After two failed Brexit deals, a new one will be put to parliament before January 31. If the deal fails and/or Brexit still pushes on by February, chaos will ensue—economic downturns, bottlenecks, and port delays.
For small businesses, Brexit creates a whole new bureaucratic nightmare. For one, importers and exporters now have to adhere to the EU rules as a non-member; EU member-countries have economic freedoms when dealing with other EU countries. Now, there are also separate customs duties and tariffs, different quality standards, trademark protection concerns, and new visa requirements.
Skills gap in the SMEs
Another cause for concern for SMEs is the skills gap. This refers to the difference between the required employee skills and the actual employee skills a business has. When left unattended, it can cause revenue losses of up to £145,000 by 2020 per SME.
Some, intend to train existing staff to close the gap; others will either hire more permanent staff or hire temporary ones. ‘For SMEs, the priority for the next year should be identifying and filling gaps within their organization,’ says Robert Half UK Managing Director Marc Weston. ‘At a time when change is the only constant, adaptability and resilience will be the key soft skills to develop.’
Whatever good remained…
Not all are gloom and doom when it comes to UK SMEs. Millennials are now leading the charge when it comes to small businesses. They're leading 38% of the young ones are running the sector. About 83% of them are unfazed by the looming shadow of Brexit, confident they'll be able to reach their goals. They are, however, unsatisfied with their bookkeepers; they're actively looking for competent certified accountants in London or anywhere in the UK.
Diverse workforce has also flourished in the SME sector. According to a study by Close Brothers Asset Finance, 70% of the respondents had positive financial performance when having a diverse set of employees. Not only that, diversity is also attractive to potential candidates. However, some companies are having difficulties hiring BAME candidates.
The future seems bleak for SMEs in a post-Brexit era. But somehow, there's a silver lining. If you have the guts and the right business know-how, maybe you can weather the woes of Brexit and fulfil the SME dream.