What Does Labour’s Win Mean for SMEs in the UK?

For the first time in 14 years, the United Kingdom has a Labour government, let’s look at what changes SMEs can expect. 

Over the past few years there has been political and economic instability due to many factors including the Coronavirus pandemic, Brexit, the invasion of Ukraine and conflict in Gaza. The new Labour government, led by Keir Starmer, claims they will rebuild Britain. What exactly does this mean for SMEs? 

At this early stage it’s the party’s manifesto and speeches made by key political figures that set the tone for the changes that we might expect to see moving forward. 

We’ve combed through Labour’s policies to bring you the key information that SMEs need to know. 

---

Employment & Wages 

The new Labour government promises to remove age bands and ensure the national minimum wage accounts for the cost of living. Their manifesto also mentions tackling pay gaps for matters concerning gender, disability and ethnicity.  

Furthermore, Labour said they will ban zero-hour contracts, put an end to ‘fire and rehire’ practices and control recruitment of staff from overseas. Employers should be aware that Labour plans to enforce basic rights from day 1 for parental leave, sick pay and protection from unfair dismissal. 

Personal Taxes & National Insurance 

Labour has big ambitions for substantial economic growth, (which we will get to shortly) but how do they plan to raise funds for these plans? 

One topic that will be at the forefront of many people’s minds is income tax. Labour says that employees should not expect raised taxes and National Insurance contributions. 

Labour claims that they will tackle tax avoidance by increasing HMRC’s powers, hiring more staff and modernising processes. Some areas they’ve highlighted include non-dom tax loopholes and the use of offshore trusts to avoid inheritance tax. 

Business Taxation & Late Payments 

The new government has promised a roadmap for business taxation within the first 6 months, claiming this will help businesses to plan investments with confidence. As for corporation tax, Labour has pledged to keep this stable at the current rate of 25%. 

Labour also revealed plans to address late payments by introducing new laws and increasing reporting requirements for larger businesses, if successful this could help small businesses and the self-employed to get paid on time. 

Energy Costs 

One of the first steps in Labour’s plans is to set up Great British Energy, a publicly owned clean energy company, with an overarching goal to switch to zero-carbon electricity by 2030. They hope this will lower energy bills in the long run and prevent another energy bill crisis. Labour also plans to close loopholes in windfall tax to enforce higher taxes on large oil and gas companies.

Business Investment & Funding 

Labour has revealed plans to reform the British Business Bank, giving it a stronger mandate to support and invest in small businesses outside of London. 

They’re also planning to retain a permanent full expensing system for capital investment and annual investment allowance for small businesses and have promised firms greater clarity on what qualifies for allowances. 

Labour also says they will introduce a National Procurement Plan to ensure at least one SME is shortlisted for each suitable contract. 

For small businesses in the Technology and Innovation sectors, the new Regulatory Innovation Office could potentially bring more funding opportunities. 

Business Rates & The High Street 

Labour is planning to scrap the existing business rates system in England, putting in place a new system with the goal of leveling the playing field between the smaller high street businesses and larger online retailers. 

It’s intended that support for small to medium businesses will positively impact the high street by filling empty units and boosting the economy. Policies aimed at realistic living wages and support for the unemployed should, in theory, increase public spending. 

Plans to ‘revitalise the high street’ under the new Labour government include investing in local infrastructure, strengthening the Post Office network and reintroducing in-person banking. 

EU & Trade Agreements 

“Making Brexit work” is another aim for the new government, with plans to deepen ties and improve the UK’s trade and investment relationships with the EU. They also promise to negotiate a veterinary agreement and provide more support for small businesses to break down barriers for trading and exporting.  

Labour has made many big promises to the public and Keir Starmer has declared that “Change begins immediately” so we expect that things will move quickly.

Please note that this information is correct at the time of writing, keep an eye out on your usual news channels for the latest updates. 

---

If you enjoy our content, make sure you follow us on LinkedIn, X and Facebook, so you don’t miss our posts!