Micro Businesses: Government Consultation
The vulnerabilities of so called ‘micro businesses’ are being addressed under government plans to protect, and better equip micro businesses in the market place. The proposals follow responses to a consultation by the previous government in supporting and protecting micro businesses that buy goods and services from other businesses in non-regulated sectors.
The vulnerabilities of so called ‘micro businesses’ are being addressed under government plans to protect, and better equip micro businesses in the market place. The proposals follow responses to a consultation by the previous government in supporting and protecting micro businesses that buy goods and services from other businesses in non-regulated sectors.
Micro businesses are businesses with 9 or fewer employees and include sole traders. The Government is planning to introduce a statutory definition of ‘micro business’, under which two out of the below conditions must be met:
• Annual turnover must not be more than £632,000;
• Balance sheet total must not be more than £316,000; and
• Average number of employees must not be more than 10.
By their very nature, micro businesses are less able and equipped to effectively negotiate with bigger suppliers, and tend to be less aware of relevant legislation that exists to protect them. However, they actually represent 95% of all UK businesses – employing some 8.5 million staff.
What is proposed?
The Government is proposing a Small Business Commissioner – a centralised contact point for small and micro businesses to resolve disputes, and give general advice and information on, for instance, their legal rights when buying goods and services. This is intended to give small businesses more confidence in their rights and enable them to negotiate more effectively.
Guidance (potentially statutory) for larger businesses when supplying micro businesses is also proposed. This may outline, for instance, the benefits of having clear, simple contractual terms with micro businesses, and offer routes for dispute resolution should a dispute later arise.
It is also proposed that larger businesses must provide pre-contract information (ie, clearly setting out key terms such as pricing and payment obligations) before entering into a contract with micro businesses. The intention is that micro businesses will have a fuller, clearer understanding of their contractual obligations, and thus able to raise any issues, before making a decision to enter into the contract.
What does this mean?
Whilst small and micro businesses will welcome any formal proposals to help them compete effectively in the marketplace, there may be an additional burden on larger businesses trading with them. They may find, for instance, that they need to check the size of a small business they are in negotiations with to ensure they comply with any new requirements.
The Government is currently seeking views on the above plans, and we will be watching closely to see what new legislation will eventually be introduced.
If you have any concerns about how the proposals could affect you and your business, should they become a reality, contact us now for expert advice. Please contact Mark Chapman on 01276 686222