The King’s Speech, delivered on 17 July 2024, outlined the new Labour government’s plan for its first year in office. It includes 40 bills, with a strong focus on economic stability, growth, and opportunity designed to benefit businesses and workers in the UK.
In this post, we highlight some of the key proposals that might affect you as an entrepreneur and employer. These include the introduction of new legislation and ambitious regulatory reforms to support small businesses.
1. Business taxation
To provide greater certainty and stability in business taxation, the new government plans to cap UK Corporation Tax at the current main rate of 25% for the entire parliamentary term. However, there is one caveat: the rate may be adjusted if it becomes internationally uncompetitive.
This pledge aims to provide businesses with predictability, facilitate long-term planning and investment decisions, and maintain the UK’s position as an attractive place to start and grow a business.
- An introduction to Corporation Tax
- 10 ways to reduce your Corporation Tax bill
- How to avoid double taxation of company profits
As part of the new tax roadmap for business, Labour has also promised to maintain investment incentives, including R&D tax reliefs and permanent full expensing for capital investments.
Full expensing enables businesses to deduct the full value of items that qualify for annual investment allowance (AIA) from their profits before tax. However, we await clarification on whether this investment incentive will extend to business assets held for leasing.
The new government also intends to scrap the UK business rates system, closing the gap between high-street shops and online retailers. By replacing it with a new system ‘suited for the 21st century’, this overhaul aims to level the playing field for smaller retailers, revitalise the UK’s high streets, and support local economies.
2. Creating a National Wealth Fund
To encourage and support private investment in new and growing industries, the Labour Party has committed to the creation of a National Wealth Fund (NWF), capitalised at £7.3 billion over the course of the parliament.
The NWF will focus on the following priority investment areas:
- Upgrading ports – improving trade and logistics through the modernisation and expansion of port facilities
- New automotive industry gigafactories – establishing large-scale battery manufacturing plants to support the electric vehicle industry
- Steel industry upgrades – investing in new technologies to improve efficiency and environmental impact in the steel industry
- Carbon capture technology – accelerating the development and deployment of advanced systems to capture and store carbon emissions
- Manufacturing green hydrogen – using renewable energy sources to promote the production of hydrogen fuel
To facilitate immediate investment, this fund will initially operate through the existing UK Infrastructure Bank before legislation cements it in statute.
3. Reforming the British Business Bank
Describing small businesses as ‘the lifeblood of communities and high streets across the country’, the new UK government intends to reform the British Business Bank – a government-owned bank that provides smaller firms with access to financial support. As part of the new National Wealth Fund, this reform will make it easier for SMEs to access the vital funding they require to start up and grow.
4. Employment reforms
Employers should prepare for a period of significant change. To deliver on the policies set out in its Plan to Make Work Pay, the government has pledged to introduce an Employment Rights Bill within its first 100 days.
Additional proposals set out in the plan include the Equality (Race and Disability) Bill and the Skills England Bill.
The aim of these reforms is to ‘back working people to take their voice back, improve their terms and conditions, and ensure protections at work are fit for the world today’. They have far-reaching consequences and will impact employers of all sizes.
Employment Rights Bill
Expected to come into force in late 2025 or early 2026, the new Employment Rights Bill is set to include a variety of new or enhanced rights for workers, including the following:
- Banning zero-hours contracts – A ban on the ‘exploitative’ use of zero-hours contracts, with rights to a more predictable contract that reflects the number of hours an individual regularly works, based on a 12-week reference period.
- Basic ‘day one’ rights – All workers in the UK will have the right to sick pay, parental leave, statutory redundancy pay, and protection from unfair dismissal from their first day of employment, subject to any probationary period necessary for employers to assess their new hires.
- Ending fire-and-rehire practices – Dismissal and re-engagement practices, known as ‘fire and rehire’, will be replaced with a strengthened code of practice based on dialogue and common understanding between workers and employers.
- Statutory Sick Pay – Removal of the lower earnings limit and three-day waiting period for claiming Statutory Sick Pay.
- Flexible working – All workers will be able to request flexible working from day one, except where such an arrangement is not reasonably feasible.
- Enhanced parental rights – Removal of the 26-week qualifying period for parental leave, and protection for new mothers from dismissal for six months after returning to work (other than in exceptional circumstances).
- Single status of worker – The three-tier system of employment status (which classifies individuals as employees, workers, or self-employed) will be replaced with a single ‘worker’ status for all people except those who are genuinely self-employed. This will help businesses comply with their legal obligations and make it easier for workers to determine their rights and protections.
Creating a genuine living wage
To ensure the minimum wage is a fair wage on which people can live, Labour plans to establish a genuine living wage that reflects the real cost of living.
Furthermore, the government will remove the ‘discriminatory’ age bands within the adult minimum wage rates. This means that the National Living Wage will apply to all adult workers rather than those aged 21 and over.
The right to switch off outside of work
To promote healthier working practices, workers will have the ‘right to switch off’ from work outside of contractual hours. This will enable workers and employers to strike the right balance between flexible working practices and ensure that ‘working from home does not result in homes turning into ’24/7 offices’.
Additional rights for self-employed workers
The government will strengthen rights and protections for self-employed workers, including the right to a written contract, action to tackle late payments, and the extension of health & safety and blacklisting protections.
Equality (Race and Disability) Bill
To tackle inequality for ethnic minorities and disabled people, Labour’s Draft Equality (Race and Disability) Bill will introduce mandatory race and disability pay gap reporting for larger firms (those with more than 250 employees). It will also extend the statutory right to equal pay to ethnic minority workers and disabled people.
Skills England Bill
Currently, skills shortages in England account for 36% of job vacancies. This prevents many small businesses from accessing the skilled workers they require to expand and grow.
To boost employment and address these shortages, the Skills England Bill will support local areas in developing the workforce they need, particularly in construction and healthcare.
Through the newly established Skills England organisation, this legislative measure will ‘bring together central and local government, businesses, training providers and unions to meet the skills needs of the next decade across all regions’.
5. Tackling late payments
As part of the Plan for Small Business, the government has pledged to tackle the ‘scourge’ of late invoice payments to small businesses. This persistent issue is faced by countless self-employed workers and small companies in the UK.
To expose late payers, new legislation will require the audit committee of large firms to report on their payment practices in their annual reports. This will provide greater transparency and improve awareness of poor standards.
At any given time, small businesses are waiting on more than £20 billion worth of overdue invoice payments. By failing to pay on time, large companies are denying firms in their supply chains the cash they require to pay workers, purchase materials, and deliver on their future orders.
Given that 50,000 UK businesses close each year due to cash flow problems, the issue of late payments is an urgent matter requiring strong and swift legislative action.
6. A fair chance at public contracts
In the UK, £30 billion worth of public contracts would be suitable for smaller businesses, yet 90% of these are awarded to large firms. To better support SMEs, the new government wants to provide them with fairer opportunities to benefit from public sector contract bidding.
Under Labour’s National Procurement Plan, there will be a requirement for at least one SME to make the shortlist when suitable contracts are put out to tender. Small businesses will also be able to compete for contracts on a level playing, with less red tape and a streamlined bidding process.
Thanks for reading
We hope you’ve found this overview of the new government’s plan for small businesses helpful. Explore the 1st Formations Blog for more UK business advice, insights, and limited company guidance.
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Comments (2)
Thanks for the article! These expectations for UK business seem fair for my own expert financial advice UK business.
Thank you for your comment, David.
Kind regards,
The 1st Formations Team