Conservatives celebrated with a clear victory over the Labour party last Friday (May 8) as current U.K. Prime Minister David Cameron came out victorious with a majority of Parliamentary seats, leading to the resignation of Labour Party leader Ed Miliband.
It was an election watched by the world and an outcome that shocked many. But as the dust settles, officials are beginning to look at what five more years of a Conservative leadership will mean for industry, economy and foreign relations.
PM Cameron’s win will also have an impact on the U.K.’s small business community and give greater insight into how government crackdowns on late payments and efforts to strengthen alternative lending will play out over the next few years.
Months ago, the impending election had led to significant anxiety among small businesses and the financial industry. Most concerning among SMEs was the threat of a hung Parliament as analysts predicted an unbearably close race. As it turned out, the contest was hardly neck-and-neck, and much of the business community is pleased with the results. Following an easy Conservative victory, director general of the Confederation of British Industry applauded the result, telling reporters, “with the votes counted, businesses will be relieved that the clouds of uncertainty around the possibility of a hung parliament have dispersed.”
Both PM Cameron and Miliband had vowed to bolster federal support for U.K. SMEs, seen as the backbone of the economy and employment, as well as the victims of a late payment pattern by their large corporate buyers.
PM Cameron had previously revealed plans to establish a new Small Business Coalition to handle financing and late payment matters, as well as foster the growth of the SME community to launch 600,000 new startups every year by 2020 through their small business manifesto, revealed in April. The Conservative party had also promised to boost SMEs’ share of federal procurement activity to one-third.
The manifesto had also promised to cut the “red tape” of various business and legal matters for SMEs, claiming that doing so will ease the regulatory burden for small business owners and save them more than $15 billion over the next half-decade.
The SME community, it seems, will be watching closely in anticipation of the fulfillment of these promises. “What we’d like to see now is the Tories deliver on their small business manifesto,” said SME group Enterprise Nation founder Emma Jones in an interview with The Guardian, “including more investment in superfast broadband for entrepreneurs, a review of benefits for the self-employed and a trebling for the startup loans program.”
Ahead of the election, Conservatives also vowed to strengthen the current Prompt Payment Code, though reports said small business owners are less than assured that PM Cameron will be able to adequately tackle the issue.
Back in 2013, PM Cameron had spoke out on the matter of late payments after officials said that up to 85 percent of U.K. SMEs have reported struggles with getting paid on later terms, forcing them to confront major cash flow problems. “It’s not right that suppliers are not getting paid on time for the work they do and the services they provide,” Cameron said at the time, “and I know that late payment can have devastating effects on our small and medium-sized businesses.”
The remarks came as the government introduced a new small business tax cut aimed at easing cash flow challenges. Since, officials have established the prompt payment code, though critics say a self-reporting mechanism fails to hold large corporate buyers accountable to their pledge to settle invoices on-time.
Following news of the election’s outcome last week, the director of the Federation of Small businesses Mike Cherry told the Financial Times that his members will be most concerned with how the Conservative party continues to address the late payment situation. Indeed, in a survey held just before the election, Legion Trade Finance found that 69 percent of members of the financial services industry surveyed said that late payments had adversely affected their small business clients. Fewer than one-fifth, however, agreed that current government efforts to tackle late payments – such as the prompt payment code – had been sufficient.
With more than $3 million worth of financing at stake for SMEs, experts held their breath to see how the election’s outcome would support – or stifle – the new referral scheme. “It is vitally important that the party or coalition government elected in May drives the implementation phase through as quickly as possible,” said Adam Tavener, the chairman of ABF finance partner pensionledfunding.com, last month. “This increase in alternative funding will double the size of the U.K.’s thriving alternative funding sector.”
Legion Trade Finance’s research also found that one quarter of those surveyed would like to see new challenger banks emerge on the market to provide more funding options for SMEs. According to reports, PM Cameron would likely support this move as the Conservative party revealed that more competitors – not a breakup of mainstream banks – would do more to increase lending.
According to Legion Trade Finance, the Conservative party is already focusing on SMEs’ access to working capital and the lending gap. “The issue of referring SMEs on to alternative lenders was a key part of the Small Business, Enterprise and Employment Bill introduced by the Coalition Government, so this is already very much on policymakers’ agenda,” the researchers concluded.
As PM Cameron and the Conservative party largely spearheaded many of the most recent policies aimed at boosting SMEs’ access to working capital and cracking down on late payments, research shows that the business community is largely pleased with the outcome of the election. A new survey by Crunch Accounting revealed that David Cameron beat out Ed Miliband when it asked SME owners to choose who they would hire. The Conservative party also beat out the Labour when Crunch asked which side better understands SMEs’ needs.
Despite PM Cameron’s promising track record, it is too soon to tell if, or how, the Conservative government will strengthen its policies in favor of SMEs. Despite the positive results of the Crunch survey for the Conservative party, researchers found that SMEs are still not completely pleased with the government’s efforts to strengthen their position. “The message that comes through loud and clear,” Crunch Accounting Managing Director Darren Fell said, “is that politicians need to pay more attention to [SMEs’] needs – after all, they are the lifeblood of Britain’s economy.”
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