The recent Labour Party victory in the UK general election marks a significant shift in the political landscape, with far-reaching implications for small and medium-sized enterprises (SMEs), particularly those in the Backbone Sectors of the economy. At Alderway Partnership Capital, we're keenly observing these mostly positive developments and their potential impact on our investment universe.
Labour’s core policy objectives are expected to have a significant impact on SMEs. Issues like rising costs, cash flow challenges, and regulatory burdens are top concerns for the businesses we are speaking with. We anticipate that Labour's focus on industrial strategy and regional development will create opportunities for SMEs outside London and the Southeast. Construction, Manufacturing, Logistics, and other critical sectors may benefit from increased investment in infrastructure and skills training.
However, potential changes in employment laws and taxation pose challenges. SMEs might need to adapt to new regulations concerning workers' rights and environmental standards. While an increase in corporation tax could affect profitability, this might be mitigated by targeted support for smaller businesses.
Labour also plans to encourage SMEs to adopt environmentally-friendly practices by offering incentives for sustainable technologies, aligning with their broader goal of positioning the UK as a leader in green finance. Additionally, reforming the Apprenticeship Levy into a Growth and Skills Levy will allow businesses to allocate funds toward a wider range of training programs, addressing the skills gap, and enhancing productivity among SMEs.
The Labour manifesto includes commitments to maintain the corporation tax rate at 25%, introduce a new business property taxation system to support high street businesses, and tackle the late payment crisis by requiring large companies to report their payment practices. These measures aim to create a more equitable environment for SMEs, enabling them to compete more effectively with larger corporations.
Labour's emphasis on planning reform and infrastructure development aims to accelerate the delivery of new homes and strengthen local industrial strategies, including a major hospital refurbishment plan. This could offer opportunities for SMEs in construction and related sectors to engage in large-scale projects, potentially boosting regional growth. However, the party's focus on environmental sustainability might also introduce new regulatory challenges, such as restoring the phase-out date for petrol and diesel vehicles and expanding renewable energy sources.
For SMEs in manufacturing and energy sectors, Labour's green policies provide opportunities for growth but also challenges too, like operational adjustments necessary to comply with new sustainability standards.
At Alderway Partnership Capital, we recognise the critical role of Backbone Businesses in the UK's economic fabric. Our Partnership Capital approach is designed to help SMEs navigate this shifting landscape, offering not just financial investment but also operational support and expertise to empower exceptional entrepreneurs.
As Labour's policies unfold, SMEs in Backbone Sectors will need to be agile and strategic. Alderway remains committed to empowering these enterprises through the challenges and opportunities ahead, bridging the Equity Gap and supporting exceptional entrepreneurs in this new political era.