Small and medium-sized enterprises (SMEs) are the bedrock of the UK economy, comprising 99.9% of all businesses and employing millions of people across the nation. With over 5.6 million SMEs, these companies are key drivers of innovation, job creation, and local economic growth.
However, many face challenges that threaten their survival in a competitive landscape. Through their policies and initiatives, local authorities (LA’s) can play a pivotal role in empowering SMEs to not only survive but thrive.
This article explores practical ways local governments can support SMEs, addressing core challenges and offering actionable solutions that foster growth, innovation, and sustainability. Drawing on insights from Steph Gemson – a qualified tax advisor and founder of TaxGem, this article highlights key areas where councils can make a significant difference.
1. Streamlined Access to Funding and Resources
One of the most significant challenges facing SMEs is the lack of access to capital. According to recent data, 20% of UK SMEs fail within their first year, and 60% close within their first three years, often due to insufficient funding. Local authorities can help close this gap by improving access to government grants, low-interest loans, and other financial resources.
Steph Gemson, highlights that many SMEs are unaware of available funding options. “We regularly get asked about funding opportunities, and the fact that people are asking means the information isn’t readily available,” says Steph. “This indicates a need for better outreach and education. Local governments should maybe consider creating centralised portals and conduct workshops or webinars to inform SMEs about available funding, simplifying the application process.”
“During the COVID-19 pandemic, access to financial aid was streamlined in response to the crisis, proving that such improvements are possible without the need for a dire situation. Councils must build on this precedent to ensure that SMEs have the financial support they need to succeed from the start.”
2. Business-Friendly Policies and Regulations
Navigating the complex regulatory environment is a common complaint from SMEs, with 50% reporting that local council policies impede their growth. A major source of frustration is bureaucratic red tape, particularly around planning permissions and other business-related approvals.
For example, SMEs looking to expand or develop new premises often face prolonged delays and high costs due to complicated planning processes. As Steph mentions, “We’ve had plans knocked back multiple times, costing us both time and money. LA’s could potentially alleviate this by appointing experts within council teams to guide SMEs through planning applications and other regulatory processes, helping businesses navigate these hurdles more efficiently.”
“Streamlining policies and regulations, especially those related to business expansion, will create a more business-friendly environment. Councils can also consider “virtual hubs” or pop-up advice centres to provide direct access to guidance on navigating local regulations.”
3. Skills Development and Training Initiatives
Investing in skills development is critical for SME growth, but training costs can be prohibitive. The average apprenticeship costs businesses between £4,000 and £7,000, while training for existing staff can exceed £2,000 per employee. This financial burden often prevents SMEs from upskilling their workforce, particularly in critical areas like digital skills.
Steph Gemson notes, “We’ve struggled recently to find good applicants for our accountancy apprenticeship, even though it’s a solid career path. Connecting SMEs with potential apprentices earlier, perhaps through school workshops, could make a big difference.”
“LA’s can bridge this gap by offering subsidised training programmes and partnering with educational institutions to provide affordable training solutions. Encouraging collaboration between local businesses and schools or colleges can also help attract apprentices and improve the skillset of the local workforce.”
4. Improved Infrastructure and Digital Connectivity
Infrastructure plays a vital role in SME productivity, yet many businesses, particularly in rural areas, suffer from poor digital connectivity. Businesses with strong broadband and transport links are shown to be 35% more productive, but underserved areas often lack these essentials, stifling growth.
Councils should prioritise investments in high-speed internet and improved transportation links, particularly for rural or remote regions. As Steph points out, “Reliable internet is critical – without it, we can’t run our business. Offering subsidies for dongles or other stopgap solutions could help SMEs that struggle with connectivity issues.”
“Moreover, improving infrastructure around business hubs or parks can make these areas more attractive to new businesses, contributing to regional economic development.”
5. Networking and Mentorship Programmes
Mentorship and networking are critical to the long-term success of SMEs. Studies show that businesses with mentors are 70% more likely to survive beyond five years.
Steph recalls her own experience, saying, “One of the first things we did after moving into our building was to go door-to-door, introducing ourselves to other businesses. Networking is a low-cost, high-impact way to promote your business and build valuable connections. LA’s can support this by organising networking events or virtual mentorship programmes, where business owners can meet, share ideas, and learn from each other.”
6. Free Promotional Opportunities
Marketing can be a significant expense for SMEs, with businesses spending up to 10% of their revenue on advertising. Many smaller firms struggle to afford this, which limits their visibility and growth potential.
Steph suggests, “We’re not saying, local authorities should have a digital billboard at the end of the street advertising every local business. But let’s give people the opportunity to thrive. Local councils can help by creating free promotional opportunities, such as sponsoring community events or establishing online business directories that showcase local SMEs. Initiatives like “shop local” campaigns can also provide SMEs with valuable exposure without the heavy financial burden.”
“And let’s not forget networking is still a really great low cost way of enabling people to promote their own businesses, which takes some of the onus off LA’s. It’s down to the business owners to take advantage of these types of initiatives to promote their own businesses.”
7. Reducing Taxation
Finally, taxation remains a significant challenge for SMEs, particularly with flat tax rates that disproportionately affect smaller businesses. Local authorities can ease this burden by offering reduced business rates, tax holidays, or flexible payment terms. This would allow SMEs to reinvest in their growth rather than being hindered by excessive tax obligations.
As Steph explains, “The thing we often see as a stumbling block for businesses, is business rates on second premises. Generally speaking, entire business rates relief is applied if the rateable value of the premises is less than £15,00 per year. But if you take on a second premise, then the small business rates relief applicable to that second premises is only around £2,000 to £3,000.
It’s not feasible to suggest that a business should have a rateable value of less than £2,000 pounds per annum so as soon as you occupy a second site, you’re into the realms of business rates. This can be a huge expense and quite a hindrance to a small business and ultimately stunts growth. Reducing these taxes would allow SMEs to expand more freely.”
Empowering SMEs is essential to fostering long-term economic growth and creating vibrant communities. Local authorities must prioritize support for SMEs by streamlining funding access, simplifying regulations, investing in infrastructure, and promoting skills development. Networking and mentorship programs, alongside free promotional opportunities and reduced taxation, can provide the support SMEs need to thrive.
By taking proactive steps, councils can drive regional economic development, ensuring that SMEs continue to innovate, grow, and create jobs.
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