A blog by Richard May

Last week I saw a Petition which started as follows:

“The govt want to stop business owners being paid via dividends to reduce tax bills. This flies in the face of risk & reward for running a business & contributing to the economy. Life as a business owner means very long hours, low pay, stress, no holiday or sick pay & a life of uncertainty & worry.”

Now I don’t actually pay myself in this way, however it struck me how much people underestimate the importance of SMEs, when their very nature means that they put far more into the UK than big brand names. Many of which seem to avoid paying any tax at all.
SMEsIt still surprises me how companies are quite happy to outsource their business to countries overseas as a fast way of gaining short term profit. Some are often oblivious to the fact that in the long run they’re damaging the UK economy.

For example, take the recent contract between the BBC and the MET office. Since 1922 the MET office has provided the British Broadcasting Company with its weather services, with an annual contract value of £3.25 bn.

In a bid to secure the “best value for licence fee payers”, the BBC put the contract out to tender. Unfortunately, the MET office lost the contract and a new provider, based outside of the UK, is anticipated to partner with the BBC next year.

I’m not saying that it is wrong to outsource, work internationally and strengthen our relationships with other countries, but I believe more thought needs to be put into the outcome it causes and not to simply look at the profit line.

To do this effectively, (using the BBC as an example) you need to consider how this £3.25 bn. breaks down. Yes, the licence fee payers may get more value for their money in the short term but hypothetically speaking the cancellation of the service could result in immediate redundancies as less man power is required.

This would in turn have a knock on effect as these individuals would have to reduce their spending with other British SMEs that they support, such as grocery stores, petrol suppliers and hair dressers. Depending on the situation, ironically they may even have to cancel their TV licence!

The cancellation of the contract also means that there will be less IT equipment and supplies needing to be purchased. They’ll also be less power consumed and fewer contractors needed to support and maintain the business.

The government will also lose access to a sizable chunk of corporation tax that would have previously been available to spend on the health service, defence and education.

Just for a bit of fun and by means of an example, we decided to put an infographic together to show how virtualDCS, our SME, impacts on the economical eco system that is the UK. If we sold out to international suppliers and outsourcers where we have a choice, what would the impact be?

As for the petition, most people don’t work for fun, if there is no incentive to start your own business then before you know it we will all be working for foreign shareholders and corporations.

 

SMEs infographic

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