Osborne accused of omitting one-person businesses

  • 11-30-2011

A smattering of positives for enterprise in yesterday’s Autumn Statement indeed “takes Britain in the right direction” although few, if any, of George Osborne’s measures will directly help small, contractor companies thrive or survive.


Asked about the chancellor’s speech, one-person business captains, analysts and advisors told Contractor UK that it was hard to fault him for his claim in the Commons, given the sheer weight of business-friendly offerings.


Pointing to an announced £40bn ‘credit easing’ scheme for SMEs, a 50% income tax cut for investing in start-ups and an extended business rates holiday, PCG, the freelancing trade group reflected last night:


“We did not expect the statement to address core freelance issues, such as the AWR or IR35, so we’re at least pleased with the pro-small business nature of what the chancellor had to say.”


Still, says Martin Hesketh of contractor accountants’ Brookson, “it is again disappointing to see no targeted measures to promote the growth of the contractor sector” from a chancellor of the exchequer.


Mr Hesketh welcomed Mr Osborne’s business-friendly moves, among them a boost to exports by UK Trade & Investment backing 50,000 SMEs (up from 25,000 currently); further lending help, by extending the EFG scheme, and an ‘above the line’ R&D tax credit for corporates.


But if flexible micro-businesses, like contractors and the self-employed, are after real encouragement from the state, they will have to look much harder into the statement, in the hope of identifying “sector-specific opportunities”. 


Against a worsening economic backdrop, Hesketh added, this is an especially harsh blow to those “small, one person businesses which help make up the flexible workforce, [and who] will be key to driving economic growth.”


The Forum of Private Business agreed, saying that sole traders and other single-person businesses appear to have been overlooked by the government, just at a time when newly announced growth initiatives will increasingly rely on them.


“The chancellor has taken some steps in the right direction but he could have made much bolder strides to get Britain trading by providing more support for the smallest businesses.


“[We heard] very little for micro-businesses, which make up the majority of small firms in the UK and require special attention,” the FPB said. “Given their importance to plans for economic growth, this was an omission.”


Where they are mentioned in the chancellor’s statement, or in its supporting documents, the government’s references to ‘micro-businesses’ are neutral-to-positive, and one-dimensional.


The self-employed, for example, are generally to be exempt from H&S legislation and, elsewhere in the statement it says, a “compensated no-fault dismissal” process will be explored for firms with fewer than 10 employees. 


There is a reference to the Agency Workers Regulations - yet only to confirm that the government will examine the AWR’s paperwork obligations in 18 months’ time, to ensure “practical arrangements for employers are as simple as possible.”


And the recruitment sector, as a whole, will be the subject of an incoming consultation on streamlining current regulation, which sector bodies are already contributing to.


However there was no mention yesterday of IR35. The closest the government came was probably in the chancellor’s speech, where he nodded to the means to nullify IR35 – the merger of income tax and national insurance administration.


The Freelancer and Contractor Services Association is unimpressed the proposal is still in place. “We believe this merger will have a highly damaging effect on the three million people who make up flexible workforce in the UK,” the group said.


“Whilst we understand the economies of scale and efficiencies within businesses that could be brought about by this proposal, the current economic climate means that it will act as a disincentive to the freelance and contractor communities.


“If the government does insist on taking this proposal forward therefore, they will need to do so in a way that continues to incentivise the flexible workforce or risking losing it.”


Despite the overall lack of micro-business-specific measures, “there are some significant investment[s] promised in large scale capital projects, such as housing, roads and rail” that may benefit contractors, Brookson said.


In outlining these potential advantages from infrastructure investment, the accountant wasn’t referring to a cap on rail fare rises (next year) or a deferment of January’s fuel duty hike – although each measure won’t be sniffed at by freelancers and other temporary staff. Rather it pointed to the associated job creation.


Approached about this implied employment boost for IT workers and the computing sector, leading industry analysis house TechMarketView responded: “The 500 new infrastructure projects will all have some IT portion.


“On top of that, part of our sector can thrive out of the very need to save costs that they economy is facing. For example, if Cloud Computing saves corporates money, then it really should be a ‘service for its time’.”


Under the autumn statement, that cloud could extend across 10 ‘super-connected’ cities with Belfast, Cardiff, Edinburgh and London among those due to be announced for 80-100mps broadband services from next year.


Later, in the spring of 2012, procurement rounds will begin for contracts to extend mobile phone coverage to 99% of the UK population, with improved networked services scheduled for early 2013.


In line with TechMarketView, IT recruitment firm Outsource UK believes such upgrades to the UK’s communication infrastructure, while oft-repeated and dating back to the previous Labour government, can only bode well for computer professionals’ prospects.


Outsource’s managing director Paul Jameson said: “Some of the chancellor’s announcements – such as plans to extend high-speed and super-speed broadband to more parts of the country – could help to create more IT jobs.


 “[But he] needed to do more to get young people into work and provide them with training, to try to plug the skills gaps currently being seen in IT.”


Another technical staff recruiter, Cogs Agency, suggested that the current and continued challenge of recruiting staff full-time is a ‘problem’ that contract and freelance candidates might actually embrace.


“Any sluggish market creates difficult conditions for permanent job creation,” the agency acknowledged, “but as we saw after the 2008 crash, demand for flexible resources in the form of freelance technologists may actually go up.”


Taken with the broadband injection, a mass release of government data - on everything from rail and weather to aviation and social care - which should help inform industry and consumers alike, also appears likely to need IT nous, particularly system integration, development and application programming.


“Making more public sector information available will help catalyse new markets and innovative products and services, as well as improving standards and transparency in public services,” the autumn statement says.


“The government will open up access to core public datasets on transport, weather and health… and will provide up to £10m over five years to establish an Open Data Institute to help industry exploit the opportunities created through release of this data.”


Seeming to underline the need for more IT-led offerings to get to market, an extra £75m injection was also promised yesterday to support technology-based SMEs to “develop, demonstrate and commercialise new products and services.” 


In terms of getting such products and services on-shelf, in the physical sense, £4m will go to Skills for Logistics, so training approaches and the “competitiveness and productivity” of the UK logistics sector can improve.


But speaking to IT suppliers last night, and regardless of their sector, the respected tech analyst Richard Holway highlighted the importance of ‘diversity of performance’ whereby, “if you have the right products and services, you can buck any economic environment.”


In a statement to CUK for its readers, Holway offered: “Success (or survival) will come in the next year or so depending on how business-savvy you are and despite the environment.


“Certainly the measures announced today are not going to have a lot of effect on that. Conversely, if you are running a struggling Software or IT Service business in a depressed area of SITS, nothing here is going to save you either.”


Nov 30, 2011

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