As the crunch negotiations continue on a transition deal, most coverage and debate on Brexit remains focused on what it means for big business. Who’s moving offices, where? Which factories might expand and which risk being shut? What does this or that FTSE 100 CEO think about the latest out of Brussels or Whitehall? This almost singular focus is natural, but it is an error.
In reality, big businesses – that have the wherewithal to be agile and to put in place multiple contingency plans – are likely to be much better placed to deal with Brexit than small businesses. But as SMEs in the UK deliver some 70% of all employment and generate more than half of all economic value, making sure Brexit is a help not a hindrance to them has to be a top priority.
As most of us don’t work in DExEU (or the European Commission), we can do little directly to promote the interests of SMEs in the negotiations. We’re condemned to the sidelines when decisions are taken whether the environment SMEs will have to navigate will be one based on ‘the’ customs union, ‘a’ customs union’, or the deepest FTA ever conceived. One thing is certain though: Brexit will lead to one of the biggest regulatory modification efforts in history, even if the UK chooses to remain closely aligned with the EU. That, in and of itself, presents a big problem for SMEs.
Surveys show that more than half of UK SMEs see changes to regulation as one of their top external threats. It is interesting to note that small business owners’ concern are predominantly with regulatory change, rather than the existence of regulation itself. That makes sense, since regulatory change has become synonymous with burdensome red tape. But in reality ‘regulation’ simply means that Government is setting rules. When done right, this can unlock value for consumers and businesses. Smaller businesses should in theory be one of the main beneficiaries. Still, as SMEs loathe regulatory change so much, there must be something seriously wrong with the process through which new rules get written.
The problem isn’t that politicians simply aren’t thinking about SMEs when drafting new regulation. All politicians love a photo-op with their local shop or manufacturer, and it’s clearly good economic sense (and therefore good electoral sense) to implement policies that actually help SMEs grow.
The problem cannot even be a lack of money. Given SMEs’ special position in the political and economic Venn diagram that Chancellors have to use to produce election-winning budgets, they can often see real money being diverted to their cause.
The problem is that SMEs simply aren’t aware of most regulation, and how it might affect them, until it is too late. SMEs don’t have the time or resource to monitor Government activity in the way big business does. A local mattress maker in Doncaster or picture framer in Glasgow is unlikely to be in a position to review proposals on e-privacy or technical standards on contactless payments. While bodies such the Federation of Small Businesses do an exceptional job of representing SMEs’ interests, it will always be impossible for them to cover everything.
Unfortunately, there is no quick fix to this structural problem. But given the significant regulatory change Brexit will bring, we must use it to transform radically how we develop regulation in the UK. We must ensure SMEs are more engaged. Perhaps that means elevating the Minister for Small Business to a Cabinet position; giving more teeth to an All Party Working Group on SMEs; putting more promotional resource behind making the gov.uk website more of an indispensable destination for information and guidance to SMEs; or even establishing an independent body to review new regulation to ensure it is ‘SME friendly’. Or maybe, in the wake of the Great Reform Bill, it means doubling down on initiatives to identify and work to reduce or even eliminate unnecessary, ineffective, out-of-date or over-complicated regulations that affect the small business community.
I don’t know for sure. But I what I do know is that we all need to do more. For me, that means not just citing SMEs as a reference when debating new regulations with policymakers, but redoubling efforts to go out and actually engage SMEs into the policymaking process itself. If you’re in business, and certainly if you’re in politics, I’d recommend you do the same. As Brexit becomes a reality and the UK embarks on potentially one of the biggest rule rewriting efforts in history, the clock is ticking.