Only Fools & Horses?

It’s that time again, ‘Smash and Grab’ week and while government makes optimistic noises over the reconstruction of Iraq’s economy, our own economy and in particular, the IT sector, continues to suffer.

I ran a quick straw poll of friends in advance of this week’s budget, asking if they thought there had been any improvement in the fragility of the business climate over the last twelve month. Sadly, I have not many friends left to ask. Four are out of business completely – administration or boot sale - , one is thinking of giving-up, two are struggling to stay afloat and one is not drawing a salary until matters improve.

These people aren’t all from big companies, they are typical SMEs with a turnover of anywhere between one and three million and with two of the failures hovering around the five million mark. Like me however, with my own business to worry about, they might reflect the words of CBI boss, Digby Jones, at last November’s eSummit in London, when he soundly ‘ticked-off’ the Prime Minister, deploring the ‘Red tape burden of British business’ and describing the barrage of “New employment rights and regulations” as being “anti-competitive”.

Maybe I’m wrong in my judgement and perhaps the £4billion increase in National Insurance (NI) contributions, announced a year ago, will be as for good for business as the R&D tax credit and the simplification of VAT administration and UK Online? Lord Sainsbury, Parliamentary Under-Secretary of State for Science and Innovation at the DTI must think so, after all, he’s just given the Labour Party £2 million pounds, so who am I, as a down-market Asda customer to criticise?

I accept, that we have a better business and regulatory environment in the UK than most OECD countries (Organisation for Economic Cooperation & Development) but is that any reason, as Digby Jones has argued, to eliminate the flexibility of a labour market, which has made us so successful and to continue overloading us with the kind of red tape and persistent taxation that the French would be proud of?

Business is hurting and the IT business is hurting more than most. On a personal note and in advance of this week’s budget, I don’t believe that government sees business as anything more than a convenient tax victim and I was surprised to hear another friend, the chief executive of a public company in the IT sector, a generous donor and a staunch party supporter, show the first real signs of a crisis of confidence as he prepared to lay off up to 40% of his staff last year.

My message to Gordon Brown is that nobody believes that greater taxation of the middle classes and domestic business will lead to a noticeable improvement in public services. Nothing short of a revolution is likely to see the trains running on time or even at all these days, because it’s the demand for better management and not simply more money that is at the heart of Britain’s problems at the beginning of the 21st century.

Unless government wakes-up to the accelerating failures in the IT sector, we won’t have much of one left by the end of this Parliament. The large global services players will have the field to themselves but the smaller entrepreneurial companies with energy and imagination might be better off looking for a government grant to set-up shop in Baghdad, as far away as possible from Gordon Brown and the reach of his business budget.


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