From the top · 11 May 2017

What the leaked Labour Party manifesto means for small business owners

Leaked Labour Party manifesto
The leaked Labour Party manifesto outlined plans to keep increase corporation tax and end zero-hour contracts

A draft of Labour’s election pledges has been leaked to the press. While it remains to be seen which policies will feature when the official document is released, the leaked Labour Party manifesto has given the clearest indication yet of what Britain would look like for small UK business owners under a Jeremy Corbyn-led Labour government.

Here, we’ve brought together the potential policies set to affect small business owners should the party win the general election in June.

Corporation tax increases

According to the leaked Labour Party manifesto, a Corbyn-led government would increase corporation tax from 19 per cent to 26 per cent.

The seven per cent corporation tax hike is at odds with guarantees Corbyn made at the Federation of Small Businesses (FSB) conference in April, when he told FSB members there would be no tax increase for the smallest firms.

Responding to the potential corporation tax increase, an FSB spokesperson said: “We are pressing Jeremy Corbyn to honour the commitment he made when he met with FSB members last month, for no increases to corporation tax for small businesses under a future Labour government.”

However, Corbyn has maintained that only the biggest companies would see the full rate increase.

Speaking at a Labour Party event in Leeds on 10 May, Corbyn said small UK businesses were “the backbone of our economy”, while a Labour government would “restore small profits rates and make only a modest increase” to corporation tax.

The Labour leader added UK corporation tax would remain “at the lowest group of the seven most industrialised countries”.

Under the current government, corporation tax would drop to 17 per cent by 2020.

Employment law

The leaked Labour Party manifesto also pledged a blanket ban on zero-hour contracts, while unpaid internships could also be ended.

Labour’s stance on flexible working has been criticised as “anti-business” and an attack on the flexible economy by the Conservative Party.

Commenting on the draft policies, Alan Price, HR director of Peninsula, said the party looked set to “clamp down on bogus self-employment”.

“Labour wishes to introduce a new statutory definition of employment status, reducing tribunal litigation and increasing understanding as many employers struggle with current case law definitions and applying these to their workforce.

“Labour would also shift the burden of proof in proving status. This means that all workers would automatically be assumed to have employee status and the employer would have to take steps to prove otherwise,” Price explained.

Labour could also strengthen paternity rights of employees. New fathers would see leave doubled by four weeks, with pay increases also marked.

Corbyn recently suggested statutory bereavement leave could be introduced for workers losing a family member.

The minimum wage would rise under a Labour government to at least £10 per hour by 2020, keeping it in line with the National Living Wage.

Late payment cap

The leaked Labour Party manifesto confirmed plans recently announced by Corbyn to introduce a cap on late payments to support small suppliers.

To hold big businesses to account, the party would introduce a 30-day deadline for invoice payments. At the FSB conference, Corbyn claimed bigger clients were “holding cash piles” that rightfully belonged to suppliers.

Regional development banks

Labour would introduce a publicly financed National Investment Bank worth £250bn to support British infrastructure.

The money would be used to provide loans to smaller firms through new regional development banks.

Bank branches

Banks would be prevented from closing in-store branches where there is a “clear local need” to remain open.

Following 1,046 bank branches in 2016, the Consumer Association calculated as many as 468 potential closures in 2017. Labour recently cited evidence suggesting lending to small firms had fallen by 63 per cent in areas suffering from branch closures.

Migrant workers

The party has said it would not impose a target cap on migration, instead focusing on “controlled” migration to maintain access to skilled workers.

Corbyn has also hinted at preventing employers from undercutting wages through cheaper foreign labour, with further measures to prevent hiring exclusively from abroad. 

Small house builders

Under Labour policy, Britain’s small house building firms could see a boom in activity. Should it win the election, the party has committed itself to building one million new homes within five years.

For small landlords, however, rents would be capped at inflation rates with a review of tenancy agreements.

Public procurement contracts

To support smaller firms bidding for public tenders, the leaked Labour Party manifesto outlined plans to block companies failing to hold a 20:1 earnings ratio. Bosses with salaries over 20 times that of the lowest-paid employees would have access to public contracts restricted.

The Conservative Party has held a tighter lid on its policy proposals for the upcoming election, but indications have suggested it to have a more relaxed take on the flexible economy and business taxes.

Suppliers suffering from late payments would continue to be supported by the incoming small business commissioner, but firms dependent on access to European workers could suffer from heavier restrictions on migration.

Make sure you’re aware of the biggest employment law changes to look out for in 2017

Sign up to our newsletter to get the latest from Business Advice.



Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

From the top