Lord Young’s report on growing businesses could have big implications for contractors.

Monday 13 May 2013

Lord Young’s latest report on boosting British business was finally published today, containing a number of recommendations aimed at making it easier for the very smallest businesses to contribute to Britain’s economic recovery.

Sole traders who are considering taking on another member of staff will be pleased to hear the former Tory minister is calling for a simplified hiring process. Although he accepts that many of Britain’s 3.6 million self-employed professionals decide to work as contractors and freelancers so they can choose for whom and when they work, Lord Young points out that many sole traders have ambitions of growth which are held up by the perceived difficulty of hiring their first staff member. To help these micro-businesses get off the ground, he calls on the government to expand the existing online portal for hiring the first employee into a one-stop shop to deal with all the tasks involved in the recruitment process.

But what about those contractors who have no desire to expand? Public sector procurement practices have long been a target of criticism from small businesses, specifically when it comes to the complexity of bidding for contracts with more than one authority. Lord Young’s reports calls for the development of a ‘single market’ for the public sector which he claims would give contractors and small businesses better access to opportunities.

Contracts worth less than the EU threshold of €200,000 (£169,000) would be exempt from all pre-qualification questionnaires to speed up the process of bidding for contracts - for anything above this, Lord Young recommends that businesses should only have to complete a single, standardised questionnaire that will act as a ‘single passport’ across the public sector.

For some public sector contracts, especially in the IT sector, the questionnaires have been just one of the prerequisites. Lord Young has welcomed the government’s recent reminder to departments that contractors do not need existing security clearance to apply for the contracts that require it.

Acknowledging that big businesses which act as primary contractors can often take months to pass payment down to subcontractors, Lord Young urges the government to expand the Project Bank Account system, currently used on some construction projects, across the full range of state-funded schemes. Paying all contractors from a single account would ensure timely payments throughout the supply chain, the report claims - in turn, this would prevent some of the cash flow difficulties which the smallest companies often face while awaiting payment.

Access to finance in general takes a central role in the report, which calls for the lifting of the age limit on applications for Start-Up Loans. By making the loans available to applicants above the age of 30, Lord Young claims the government could hope not only to increase business activity in the UK but encourage more experienced workers to strike out on their own.

The Business Finance Partnership will also provide the smallest businesses with £100 million in additional funding. The partnership encourages alternative sources of finance such as peer-to-peer lending and crowdsourcing, helping small businesses to circumvent some banks’ reluctance to lend.

Entitled ‘Growing Your Business’, the report will clearly have the broadest repercussions for those self-employed professionals looking to expand, perhaps through their own limited companies. But it is likely that freelancers who plan to stay solo will feel a ripple effect too.

By Victoria McDonnell

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