What will the election mean for small businesses?

Tuesday, 18th April 2017

The University of Cambridge ranked 4th in the world and arguably one of the best-known universities in the world needs no introduction. However, there’s more to studying abroad than just lectures – and if you’re looking for a place to relax and just the best of BAs the country prepares to go to the polls on the 8th June, the future of the UK hangs in the balance. With the three main parties taking starkly different stances for the first time in several years, the outcome of the election will likely alter the course of the UK’s future - and that of the economy. Every sector will be affected by Thursday’s decision; especially small businesses, on whom changes to the UK’s economy, tax rates and business legislation can have a disproportionately large effect. 

So what exactly do each of the parties manifestos mean for small businesses?


Labour’s key business policy is their tough stance on zero-hours contracts and the gig economy. Their manifesto has outlined plans to ban zero-hours contracts entirely, alongside unpaid internships; but the policy with the propensity to have the largest effect on small businesses is Labour’s proposition to increase the living wage to £10 per hour by 2022. 

Labour has pledged to increase the minimum wage to a living wage for all employees aged 18 or over and wants all workers to enjoy full employee rights from “day one” including temporary staff.

Whilst this is a bonus for employees, it can be a hard blow to small businesses. When the National Living Wage increased in April of this year, more than 2 million Britons benefited from the 30p increase for everyone over 24.  

However as Mike Cherry, chairman of the Federation of Small Businesses, points out, “Most small business owners absorb the cost of wage increases by taking lower profits.” Effectively, requiring businesses to pay their staff more cuts into profits, especially in small businesses when margins are tight.

Other Labour policies are friendlier to small businesses, however, including a pledge to bring in a lower small profits rate of corporation tax for SMEs. Labour also wish to scrap quarterly reporting for businesses with a turnover of under £85,000 and protect funding to SMEs that hire apprentices. 


One of the Tories key policies is to double the Immigration Skills Charge to £2,000 per year. The charge is levied exclusively on companies employing migrant workers, drastically increasing the cost of hiring non-EU workers for small businesses.

The Conservatives have also proposed to increase the National Living Wage, taking it to 60 percent of median earnings by 2020. Alongside the wage increase, the Tories are hoping to extend workers rights to include benefits such as a year's unpaid leave to care for relatives.

According to Suzanne Horne, head of the international employment practice at Paul Hastings these proposals could be bad news for small businesses: 

“For SMEs in particular, more employment rights means more workforce planning at a time when employers are already juggling the challenges that come from existing statutory rights."

On the plus side, the Tories are offering a National Insurance holiday for businesses that take on ex-offenders, disabled people, and those with mental health issues.

Lib Dems: 

Liberal Democrat leader Tim Farron has pledged to be on the side of small businesses, rather than large corporations. One of the party’s key policies is offering entrepreneurs a £100-a-week allowance to help with living costs, up to a maximum of £2,600.

The start-up allowance scheme is designed to differentiate the Liberal Democrats from both Labour and Conservatives, boosting support for British entrepreneurs. Farron has tried hard to make his party appealing to small business owners, including pledging to keep Britain in the single market. 

“Unlike Labour and the Conservatives, we would stay in the single market," he said during a visit to Bath in May.  "The Conservatives have lost the right to call themselves the party of business. The Liberal Democrats are now."

However, the Lib Dems are also proposing an increase in rights for employees similar to those of Labour, giving employees more rights from “day one”, including a presumption of flexible hours. 


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