The Federation of Small Businesses has written to seven of the UK’s regulators with a set of measures to unlock SME growth. The regulators are the Financial Conduct Authority, Finance Reporting Council, Ofgem, Ofwat, Ofcom, Competition and Markets Authority and Information Commissioner’s Office.
This follows requests from the Prime Minister, the Chancellor of the Exchequer and the Business Secretary for leading regulators to submit proposals by mid-January for reforms that will spur investments and back economic upturn.
I’m all in favour of these proposals, especially the one which puts directors personally on the hook for business loans.
- Financial Conduct Authority: The FCA should include that it will now properly investigate the blanket use of Personal Guarantees for limited companies. As FSB set out in its super-complaint, personal guarantees sit in a twilight zone in terms of regulation, as they turn a loan to a limited company into a personal liability, yet the individual borrowers aren’t covered by consumer protections that exist for other kinds of lending. This is a barrier to growth as company directors hold back from accessing finance to invest in their business, take risks, and grow. FCA is empowered to look into this if it deems fit – but if it does not, then Government should legislate to compel PGs within the FCA’s regulatory remit.
- Financial Reporting Council: The FRC should include how it plans to ensure major companies adopt the Government’s new anti-late payments stance by supporting much greater transparency and accountability through payment performance and practice of large firms being added to Audit Committee responsibilities, prominently, within the FRC’s own code of practice. It should also launch a major campaign to highlight the importance of this to finance directors and departments of all companies, so that those who are doing well are highlighted and supported, and those that continue to pay late are increasingly isolated and brought up to paying withing at least 30 days. The FRC should include in here a recommendation to sign the Government and Small Business Commissioner’s new Fair Payment Code as it opens next month.
- Ofgem: Ofgem should include that it will ensure small firms have a 14-day cooling off period on their energy contracts, and require suppliers to provide bills for SMEs on a quarterly basis to stop them falling into unplanned debt without noticing. It should also regularly review its new and welcome moves to improve the intermediaries market, to ensure more consistent honourable practice among brokers.
- Ofwat: Ofwat, in the wake of current eyewatering increases in water bills that are disproportionately higher for business, should include a commitment to take a fairer approach to small businesses which are more akin to consumers than corporates or industry. This would include, for example, regulating to ensure protections for a small business that could face being cut off, much like a consumer. In addition, it could regulate for automatic compensation when an account is in credit.
- Ofcom: Ofcom should include a proposal to broaden its remit to include regulation of cloud services in the same way as broadband providers, as an increasingly vital part of national infrastructure, ensuring it remains affordable for small businesses and providers do not charge excess egress fees. In another area of Ofcom’s remit, many small businesses rely on the full 6-day postal USO for affordable, reliable delivery of letters and small products as part of their business models and enables them to compete with larger and more established businesses. Ofcom should commit to protecting the USO, and for measures to help Royal Mail (such as changing bulk mail to take an extra day) to be considered before measures that would hurt small business growth by undermining abilities to get to their customers.
- Competition and Markets Authority: The CMA should include how its approach to its new digital markets competition regime, including its first three planned interventions, will protect small businesses and their customers on major online platforms. And as software use continues to expand, to maintain competition between options and costs, the CMA should include that it will look to buttress data interoperability. Innovation and competitiveness between software is not achievable if small firms are unable to change software products because it’s too difficult to migrate data.
- Information Commissioner’s Office: The ICO should include a small business exemption or discount for its regulatory fees, which are due to rise considerably – paid for by larger firms who currently pay disproportionately much less by comparison to the size of their business, activities undertaken and numbers of consumers within the purview of the Commissioner’s office. Alongside this, the ICO should include a small business campaign and resources to make compliance easier, which FSB could assist with, and provide help when firms make a mistake rather than taking a fines-first approach.
We’re glad to see this drive at the start of a new Government and new Parliament.
Regulators must grasp this opportunity to propose small business growth measures within their activities and remits. We’re also keen to see Ministers and all public bodies to put their shoulders to the wheel on growth, alongside business and industry.
Regulating for growth doesn’t always mean deregulation – sometimes it means better protection for small firms as consumers.
While our members often tell us that current regulatory environment is burdensome, they also understand that smart regulations and switched-on regulators who are alive to their needs are a necessary part of a fairer, more efficient business ecosystem.
Our proposals will help regulators make sure that small business growth is front and centre as they assemble their lists of pro-growth measures.
– Tina McKenzie, Policy Chair, Federation of Small Businesses
