The government promised to make life easier for small businesses. Halfway through its current term, we ask leading retailers and commentators to rate its performance.
Public affairs director at the Association of Convenience Stores
Spar, Weston-Super-Mare, Somerset
Earlham and Stalham Shopper, Norfolk
Knight’s Budgens of Hassocks, West Sussex
James Graven, Cambridgeshire
Spar Compton, Wolverhampton
Cutting red tape, ending the culture of ‘tick-box’ regulation, levelling the playing field between small and large retailers, making small business rate relief automatic these are some of the promises the coalition government made in the wake of its dramatic formation back in May 2010.
More than two years on, and half-way through the current Parliamentary cycle, have ministers stuck to their pledges? There have been a number of announcements resembling those early promises, be it on reforming employment legislation, putting town centres at the heart of planning law, cutting health and safety red tape, introducing a £1bn small business bank, and reducing corporation tax. But do these initiatives mean change on the ground, or are they merely cosmetic and an endless stream of platitudes to create an impression that the government is taking positive action to help business?
Alternatively, there have been announcements which were both unforeseen and contradictory to the spirit of those early promises. Sunday trading anyone? Delaying a decision on rates evaluation?
Obviously, the government can only do so much, especially amid a struggling economy, but savvy retailers know when ministers could do more to facilitate their daily working lives, or when legislation hampers their progress.
So we’ve asked some leading retailers and the Association of Convenience Stores to provide a half-time report of the coalition’s achievements to date.
Gordon: We’re unhappy with tobacco display regulations and not looking forward to the ‘Great Cover Up!’ We’re less than happy with compulsory annual wage rises, but slightly relieved that only over-21s are affected. It is imperative that larger supermarkets are restricted to six hours trading on a Sunday - any relaxation would be very damaging. (5/10)
Jonathan: I haven’t seen a great reduction in the burden of regulation to my business. From what I’ve seen, much of the cuts in regulation have come from the Red Tape Challenge initiative, but relate to many old, unused regulations. (4/10)
David: The health and safety and employment proposals are a step in the right direction, but go nowhere near as far as is required. The health and safety piece will not affect my business as we rarely get visits around this area and I feel it is a political PR exercise. The employment piece does not go far and only limits my exposure to a monetary payout. We need better protection to be able to make decisions about poor-performing team members. As for Sunday trading, I am still angry that the government has not yet closed the door on changing this legislation. The tobacco display ban is ridiculous and does not solve the problem of young smokers. (4/10)
Nigel: Licensing continues to be a minefield, while the tobacco display ban is unnecessary regulation to placate the health lobby. Employment is the most costly part of our businesses the law is weighted in favour of the employee and we have to jump through hoops to sack someone, even if they are stealing. The proposed changes are too little and may be too late. Many people are put off setting up businesses because of the complexities of providing employment. Health and safety rules are being revised and may be less onerous. Sunday trading is a good illustration of how much influence the major players can have, and how easily government can be taken in by the big boys. (2/10)
Mark: The government will have you believe that we are to blame for alcohol problems in this country. The introduction of 24-hour licensing was a huge mistake by politicians. As for the tobacco display ban - both coalition parties were against this in opposition, but both u-turned in government. (3/10)
Shane: The Red Tape Challenge aspired to cut 3,000 retail-related regulations. However, our fear is that most are obsolete rules that don’t impact on the day-to-day business of stores. In areas such as the tobacco display ban or alcohol licensing, this government has so far proved unable to make a genuine difference to the burden of red tape. Another issue is that the rules themselves are rarely the issue the problem is related to the attitude of those enforcing the rules. Therefore government action in two areas - a new code of practice for police and trading standards on underage sales, and the development of primary authority schemes - have the potential to benefit retailers.
Gordon: Energy costs have been another big drain on our finances, eating some £30,000 per annum in this one small shop. These costs appear to be out of control. The suppliers appear to have a monopoly and we wish the government would introduce some form of capping mechanism. (4/10)
Jonathan: This subject is close to my heart, having fallen victim to a large energy supplier. While costs continue to rise, the government seems reluctant to deal with the bullying tactics of the energy companies. (3/10)
David: Higher energy and fuel costs not only have a direct effect on our shop heating and electricity costs, but also the cost of the products we are selling. We are very late in the game on this one, but a commitment needs to be made in trying to secure our own ability to produce energy - at least in the short term to stabilise prices. Energy prices are not going down even as world consumption of oil declines, so we need to start taking steps now - expensive French nuclear power stations will not be viable. (3/10)
Nigel: Another example of how the government is unduly influenced by big business. It’s about time they saw the light and cracked down on the crooks who call themselves energy suppliers. (0/10)
Mark: Energy costs are now my second biggest overhead. The government appears to be doing nothing to reduce these costs. The climate control levy is simply another con. It has been increased, but why? It’s not about environmental control, it’s about revenue and raising money. Poor policy has created the problem here. (4/10)
Shane: A real tension exists between the desire of the Treasury and business departments that are very aware of the impact of rising energy costs on consumer demand and business growth, and the energy and climate change department keen to see major investment in energy infrastructure. Generally, the regulator Ofgem is motivated to do the right things in terms of getting competition working in gas and electricity markets, but they have been too preoccupied with self-regulatory solutions that have been delayed and complicated by the energy companies.
Gordon: Rates are a huge drain on our resources and it is ironic that we still have to pay to have our rubbish removed, given how much we are charged. (3/10)
Jonathan: The industry has continually called on the government to do something about business rates, but other than increasing them nothing seems to happen. They remain crippling to many small shops, and pleas appear to fall on deaf ears. (3/10)
David: Nothing has been done to try to help high street retailers, bar a temporary rate relief for smaller firms, but this doesn’t include mine. The reality is that business rates have risen exponentially during the recession so the rate relief only really pushes rates down to where they should be. The rest of us ‘larger’ retailers just pay more. (2/10)
Nigel: Who has actually had any positive results on business rates from this government, apart from being able to put off paying increases into the future? A remarkable illustration of this and previous governments’ ‘head in the sand’ policies. (0/10)
Mark: Business rates up 5% in a recession, do I need to say more? Where is all this money the government believes I have? (3/10)
Shane: Ministers have ignored calls from across the retail sector for action on business rates. This remains the single biggest cost burden directly imposed by the government on retailers, and the inflation-busting increases are increasing the barriers to growth and investment for retailers across the high street. The reason for the lack of action is related to the amount of revenue the government receives from business rates paid by the retail sector - it equates to £5bn a year - and they need this money given the significant pressure on the public finances.
Gordon: We have no experience of bank lending, other than derogatory remarks in the press. (5/10)
Jonathan: Many banks are reluctant to increase overdrafts in the current climate, let alone fund new projects. This is extremely worrying for the future growth of our industry. Without investment, shops look tired and dated and consumers notice and vote with their feet. Lending needs to become more readily available and banks, especially those in state ownership, should be forced to lend. (3/10)
David: Our recent experience has been indifferent. For one of the stores we are hoping to take on, we’ve been informed that we’d have to borrow via the new government-backed lending scheme, but still at quite a high bank margin. We also experienced a removal of our overdraft facility. Admittedly, it was not in use, but we were not given the option and I know other retailers had overdrafts turned into loans. This ultimately becomes a profit driver for the bank and a cost to the retailer.
The government wants tougher lending criteria to prevent the loose lending of the good years. They want banks to strengthen balance sheets to protect themselves, so what is a bank to do? Lend only to very secure customers, take fewer risks and charge more for products to protect margins? But the government also want the banks to lend, so it’s a catch 22. (5/10)
Nigel: They are not! (0/10)
Mark: The government needs to take back control of the banking system. It can give money to banks, but they won’t give to small businesses. If I needed finance I imagine it would be difficult. Our problem was bailing out banks in the first place. The government’s trying, but it’s not enough. They’re not addressing the real problems. (5/10)
Shane: While there is evidence retailers are experiencing problems with getting loans (on terms that they feel able to accept), most retailers are not currently looking for loans because they are holding off on plans for significant new investment. In fact, the bigger concerns relate to the everyday costs of business banking, such as cash handling fees and overdraft terms and conditions.
Gordon: We have not been affected by planning regulations so are unable to comment. (5/10)
Jonathan: This remains rather an unknown until further test cases regarding the new National Planning Policy Framework (NPPF) get heard. The wording of the NPPF was particularly welcomed regarding town centre-first, but hopefully ministers will back up those words with action if councils ignore it. (6/10)
David: The promise of a new planning framework was a breath of fresh air - local people deciding - but really what we have is a potential disaster for our industry. I accept the Localism Bill has yet to be tested, but it does appear that if a development can be deemed ‘sustainable’, it’s got a chance of going through. I have seen first-hand the fundamental flaws of our planning system. This is namely that if you have more money than the local authority, there is a good chance you are going to get your application through. The new legislation has the potential for making planning easier for supermarkets, and not harder. A local authority can still be bullied by successive planning applications and appeals. (1/10)
Nigel: Needlessly changing planning law to a woolly headed framework that has the potential to allow development on green belt allow development of inappropriate size, damaging town centres and temporarily allow people to build huge extensions on their houses in order boost the building industry… sorry? People haven’t got the money to fill up their cars with petrol or pay for their heating, and they are going to build extensions? What a farce! (0/10)
Mark: The multiples are growing at will, with the government seemingly unwilling to empower local people to say no. Development will become easier under the new planning framework. Also, ministers had the chance to legislate to stop any Tesco Express from moving into disused pubs without gaining planning permission, but they didn’t. (5/10)
Shane: The NPPF was a genuinely radical reform that we have yet to see the full implications of. But developers want to take advantage of the concern to loosen planning rules and get permission to build where they want. So in town centre terms, for every out-of-town retail development given approval it makes it less likely that a town centre regeneration project will secure investment.
Gordon: Taxes which are payable in July and January always hurt - we all feel we pay too much! (3/10)
Jonathan: The increase in VAT has hit many consumers. As a fuel retailer, I’ve particularly noticed this. However, the cut in corporation tax was welcome. (5/10)
David: I would like to see corporation tax come down further, but a cut is very welcome. The problem in our sector is that sales can be strong and margins tight, so profit is harder to come by. A review of all taxes would be helpful. (7/10)
Nigel: Overall taxes are up - the increase in VAT causes retailers problems in less spending and the cost of changing the rate. (0/10)
Mark: I agree with removing tax for low-income workers, but to raise tax for higher income earners will stifle business. The slight drop in corporation tax has made no difference to me at all. (4/10)
Shane: The government has taken action to reduce taxation on business, having reduced corporation tax and removed the planned rise in national insurance. However, the increase in VAT has had a negative effect on demand.
It is clear that retailers feel let down by the government, which has not fulfilled its early promises. It remains to be seen whether some of its policies will have the desired effect, but at half-time the verdict appears to be unequivocal: guilty of ignoring retailers’ concerns.
“The government simply does not understand the life of a hard-working retailer, who has few holidays, no days off, endures costs rising way above inflation, and more admin and red tape,” says Mark. “We are seen as the devils in retail clothes by Parliament.”
David adds: “The Coalition needs to go back and look at our history, which is founded on small enterprise.”
With another business rates rise recently announced, the pressure is growing on Messrs Cameron and Clegg to support local retailers and other small businesses in order to overturn the verdict •