Billions in tax relief are allocated to UK small businesses under the assumption that they are driving economic transformation. However, this belief may be misguided. Despite the substantial financial support and goodwill extended to entrepreneurs, research indicates that many of them contribute little to the prosperity of the UK economy after receiving these benefits.
Academic studies reveal that while small business owners play a significant role in the economy and employment, they are rarely the catalysts for innovation, productivity enhancements, or the overall well-being of their employees. In fact, health and safety standards tend to be lower in small businesses compared to larger enterprises.
For genuine innovation and creativity, it is argued that larger companies with ample expertise or certain types of startups, such as those affiliated with universities or backed by private equity firms, are more reliable avenues. These entities often have the resources and structure necessary to foster meaningful advancements and positive outcomes for both the economy and the workforce.
Targeted state support should be directed towards companies that demonstrate genuine potential for economic growth and innovation. Conversely, the notion of entrepreneurs as unparalleled wealth generators is, at best, unsubstantiated and, at worst, entirely misguided.
It is crucial to heed the findings of academic research, particularly regarding entrepreneurship, as it serves as the foundation of the neoliberal narrative that has shaped political and economic discourse for decades. Despite lacking empirical evidence, this narrative has led to widespread government assistance for entrepreneurs, fueled by the hope that any individual or business could replicate the success of companies like Microsoft or Amazon.
As of the beginning of 2023, there were approximately 1.4 million small businesses (employing 1 to 49 individuals) and 36,900 medium-sized businesses (employing 50 to 249 individuals) in the UK. Recently, the National Audit Office (NAO) identified 39 tax reliefs aimed at promoting business investment. The estimated cost for 29 of these reliefs, most of which targeted small and medium-sized enterprises (SMEs), was £16.6 billion.
However, the government’s return on investment remains uncertain. According to the NAO, “The Treasury and HMRC do not monitor or evaluate these reliefs closely enough to determine if they are cost-effective or achieve their intended economic impacts.”
Read More: https://ciooutlookmagazine.com/
