HOW will the UK set business up to be sustainably competitive in a global economy?
That is the question politicians need to have an answer to. Get this right and mid-sized businesses (MSBs) could be adding an additional £50bn to the economy by 2020.
Business is critical to creating a vibrant economy where everyone can flourish. The power of the MSB segment to deliver this is compelling. Our ongoing conversations with MSBs and government has established a live agenda of what needs to be done to enable a sustainable business environment.
With the most unpredictable election outcome in years and the enormous shift in the political and economic environment that has taken place since the last, this election will frame the business and regulatory environment in the UK for the next five years. It is vital that our politicians understand the challenges faced by those that are the creators of UK jobs and wealth; all the evidence points to mid-sized businesses being the engine room for growth – and the prize, if we get it right, is big – for jobs, getting the UK’s books balanced and the future sustainability of the UK in the global economy.
With general trust in business at an all-time low there are key strands that politicians will need to grasp to enable business to achieve this:
• Build trust and integrity in the markets
Whatever the election result, the next few years will be a period of massive change, with technology, public trust and sustainability challenging traditional business models.
We know that when you have a combination of a short term perspective in markets and squeezed profits as business models are challenged, that businesses can become too focused on driving short term return. In this toxic triangle the profit motive can become unhinged from the purpose motive, bad choices are made and trust eroded.
Government and regulators have put considerable emphasis on new regulation – we’d like to see a shift to a longer term perspective in markets and a focus on sustainable business models. Applying more regulation on top of the existing system may be damaging for the market overall and stifle the innovation needed for businesses to be fit for the future.
• Enable dynamic businesses to thrive
Our most recent Agents of Growth research shows that there has been a seismic shift in business leaders’ perceived challenges to growth over the course of the coalition. At the last election, in the aftermath of the financial crash, customer demand, late payment from customers, marketplace competition and access to finance were of greatest concern. Five years on the priority concerns are the availability of skills at all levels and employee turnover in general. Of greater concern, and perhaps the thing most easily addressed is the burden of regulatory requirements.
Critically, to see an improvement in our balance of trade, market competition and ease of exporting must be addressed. We know that MSBs can find it hard work entering a new market, with a combination of researching the market, building channels to market and overcoming local rules and regulations. Free trade agreements can help make this simpler, by reducing and removing these barriers.
So government needs to work with the EU to negotiate comprehensive trade agreements, such as with the US, as well as explaining the benefits and safeguards of these to our wider society. Increasing exporting must be an objective for the whole of government, with every minister and their department, whether HMRC helping business deal with their overseas counterparts or the Department of Health backing pharmaceutical exports, focussed on boosting international trade.
• Build an environment that makes it easy to do business here
We know that business wants certainty: over access to skills, ease of getting in and out of cities to do business and visibility over the costs of doing business. The modernisation of the regulatory and tax framework, including tax simplification, must be a priority. Despite pledges, and the best efforts from the Chancellor, with the creation of the Office of Tax Simplification, the number of tax reliefs has actually increased under the coalition and currently stands at around 1,100.
The stakes are high – and the voice of mid-sized business is key. That’s why we’re hosting an elections hustings in mid-April, just three weeks out from election day, specifically for leaders of dynamic businesses. As well as giving all present an opportunity to express views on what else is needed to fuel UK plc in the global economy, this will be a prime opportunity for a full exchange of opinions between these business leaders and to test Natalie Bennett, Vince Cable, Matthew Hancock and Chuka Umunna on their business agendas. Judging from initial questions business leaders have submitted for the debate, issues likely to be discussed include: tax simplification, taxing jobs versus profit, regulation, energy policies including support for green energy; and how each party will put national interest before party in the (likely) event of a hung parliament.
The opportunity is there for the UK to lead in sustainable growth – we all have the responsibility to step up and shape the environment needed to deliver that.
The debate will be facilitated by Anna Edwards, News Anchor, Bloomberg TV and broadcast live on Bloomberg TV at 8:30am 14 April.
Sacha Romanovitch is CEO elect at Grant Thornton UK