Is the government doing enough to support home-based businesses in the UK?
Previously, the focus of the government was primarily on entrepreneurs, and larger, high-growth start-ups. This year, home-based businesses finally got the attention they deserve! The small business economy is thriving and has become an indispensable contributor to the UK’s economy. Home-based businesses comprise the majority of small business enterprises, at 59% of the total. Finally, the government has recognised that it needs to cut legislative red tape to support the creation of new home-based businesses. These new regulations address planning permissions, regulation, rented housing business rates and more.
Why the attitude change towards home-based businesses?
The contribution of small businesses to the economy could not be ignored any longer. According to government figures, the 2.9 million home-based businesses in the UK contribute £300 billion to the economy, and about 70% of new businesses start off in the home. The data cannot be ignored. With more than 500,000 businesses registering with Companies House in 2013 and the number of new companies this year reaching a five year high, legislators finally realised the importance of home-based small businesses to the economy.
What is changing for home-based businesses?
Enterprise minister Matthew Hancock who announced the Home Based Business Initiative (HBI) last August, highlights the fact that these changes will make it easier for people to run a home-based business. Some of the welcomed changes:
- Updated planning guidance will clarify that planning permission is not normally needed to run a business from home
- Running a business from a rented home will be made simpler
- New business rates guidance will clarify that in the majority of cases, home-based businesses will not need to pay business rates
Most ‘kitchen table start-ups’ do not need planning permissions or to pay business rates.
The government has created the Business is Great website, which offers support and advice for both setting up and growing a business. You qualify for help from them if you have fewer than 250 employees, are based in England and have a turnover under £40m. The site contains advice and links to help you start, grow and accelerate your home based business. They proclaim to have the best specialist advice, export and business finance support so that businesses with the ambition and capacity to grow can get the personalised support they need.
Will the new government initiatives finally support home-based businesses?
These changes are embraced by home-based business and support organisations alike. Of particular interest to these organizations are the changes to tenancy contracts. To support the move, which has the blessing of the British Property Federation, the government says that a new model tenancy will be established and remove unnecessary barriers to setting up business at home.
This positive step by the government to put policies into place that finally gives legitimacy to home-based businesses and removes unnecessary that have stifled growth in this sector is welcomed by all. However, some commentators have argued that these proposed changes are mere theory rather than substance, as the clarity for the existing guidance is really just common sense. Explaining further, if you can use your personal office property recreationally from home, why would you need to get planning permission to use the same property for business purposes?
What is the impact of this new proposed government legislation?
The BIS estimated that tax relief for such businesses to hire staff is a popular move. For example, official BIS data show that if just 1 in 10 home businesses hired an extra staff member, 300,000 extra jobs could be created. However, the new measures announced are unlikely to encourage employee recruitment, as firms employing staff to work at their premises still currently pay business rates. Firms who sell goods or services to their customers directly (i.e. not via post), will still need to pay business rates.
The Centre for Entrepreneurs also continues to question how much the government supports home-based, small businesses. They have been campaigning for local authorities to buy more from small businesses. Data from the Spend Network shows the disparity between some councils such as Stoke on Trent City Council spending 21.7% with small firms, compared to a measely 4.33% spent by Sheffield City Council.
Tech entrepreneurs are also concerned about government red tape limiting their growth. The Coalition for a Digital Economy (COADEC) is also making recommendations for legislative changes that will encourage the growth of technology start-ups. Their agenda includes suggestions such as tax cuts for entrepreneurs and improving access to talented individuals from around the globe.
While the government has proposed new measures designed to clarify current regulations to encourage people to start a home business and improved access to funding, there is still plenty of measure for improvement and removal of the tangled web of government legislation. For now though, home-based and small business owners are encouraged that steps to help free them from the red tape that has stifled their growth are being taken, indicating that their supporters have had an impact on policy-makers, albeit eventually.