The small business round-up: August 2022

In this episode, we look at the current state of play with the Northern Ireland protocol, an issue that many small businesses will be keeping an eye on. We also examine the issue of rising insurance costs for small businesses and provide some tips for how you manage the lack of affordable premiums. Finally, we talk to FSB about what small businesses will need from a new Prime Minister, whether Liz Truss or Rishi Sunak, once the final round of ballots take place.

Featuring:
Roger Pollen, Head of FSB in Northern Ireland
David Perry, Managing Director, FSB Insurance Service
David Hale, Head of Public Affairs, FSB

Transcript

0:00

All right

Jon Watkins: 0:13

Welcome to the latest FSB Monthly Round-up podcast brought to you by the Federation of Small Businesses, and the go-to podcast for news tips and important information for small businesses, and the self-employed. This episode is our August Small Business Round-up, in which we will take a look at some of the important issues hitting the headlines at the moment, and which you need to be aware of right now as small businesses. This month we will look at three key issues in particular. The first is the current state of play with the Northern Ireland protocol and issue that many small businesses will be keeping an eye on and I'm pleased to say that Roger Pollen, Head of FSB in Northern Ireland is here to speak to us about that. We will also look at the growing issue of rising insurance premiums for small businesses and provide some tips for how you can manage the lack of affordable premiums in the market. And to discuss that we're joined by David Perry from the FSB Insurance Service. And last but not least, as a new Prime Minister gets set to take up the hot seat at Number 10, David Hale, Head of Public Affairs at FSB is here to share what the FSB would like to see from that new PM, whether that ends up being Rishi Sunak or Liz Truss. And at the time of recording, we are just waiting for that final round of the ballot to take place. Thank you all for joining me. Roger, I'd like to start with the Northern Ireland protocol, if I may. This is probably something that a lot of small businesses have heard of. In the media, there's been quite a lot of coverage, but they might not quite be sure exactly what it is, and what it might mean to them. Can you give us a bit of a summary?

Roger Pollen: 2:02

Yes, really, the protocol is the legal instrument that was put in place to address the fact that Northern Ireland sits within two markets. So if you imagine a Venn diagram, the UK is one part of that, the EU is the other, and Northern Ireland is the bit in the middle where the two of them overlap. So we have the UK Internal Market, Northern Ireland is part of that. And we also have the EU Single Market and Northern Ireland as part of that as well. And that's both a problem and an opportunity. So the protocol is really just the framework that was put in place to try and manage that that rather unusual situation. What we're hearing with in the media now, what's making all the noise about this is the fact that it's not working properly, the two sides can't reach agreement on how to improve it, and so one side is taking action unilaterally. And that action is, for example includes things like grace periods, so lots of things are being allowed to carry on as they did before Brexit, because of unilaterally applied grace periods. So things like food coming in for supermarkets, parcels coming in for consumers, all of that is continuing just the way it always did, but only because the UK Government on its own has said that it can. So that's a problem. And that the stuff that's making the noise in the media at the moment is really just working out how we are going to try and reach this by agreement, rather than just by one side taking action on its own? Well, I suppose you could characterise it by the'five Ps', pets, parcels, potatoes and potted plants. Those are things that consumers in Northern Ireland would expect to be able to get because they are part of the UK they live here, they want to get the continue to get the things they've always got from businesses sending them across from GB, but because of the protocol, each of those is restricted in some ways or banned. So the five P's just characterises what needs to be addressed. There are lots of ways that this can be done. UK Government has brought forward proposals, the EU has brought forward proposals, but unfortunately, neither side really seems to be engaging in a proper negotiation and discussion how to move forward. So we're stuck. And we then have overlaid on that the Conservative leadership election. So we need to wait and see now which way is the successful candidate going to take the discussions and negotiations beyond this point, we have the protocol bill going through Parliament. It's got quite far, but it's about to hit the House of Lords. And we've no idea what will happen there. And even if it does get through, how well that will be used to address the problems that businesses here are facing.

Jon Watkins: 4:35

Yeah. And you mentioned the the five P's and some of the sort of issues that it's causing, but how specifically, is it affecting small businesses? You know, we hear things about taxes, delays, bureaucracy, supply chain issues, what's the impact on the ground for small businesses?

Roger Pollen: 4:54

There's so many different impacts. It's a bit like a tapestry, really. So we've done a piece of work recently to try and map out the number and the range of businesses that are badly impacted by it. But to give you an example, we have a lot of food retailers here, small delicatessens, cafes, artisans, traders. They're all having real difficulty getting supplies through from GB into Northern Ireland, even though they don't trade south of the border into the EU. So we need to find a common sense way of letting those businesses carry on with their trade, whilst not presenting any risks to the single market. That's one example. But there are many of them throughout the whole of the economy here.

Jon Watkins: 5:33

Yeah. And you mentioned the Bill at the House of Lords. What else would you like to see to resolve this? What are you calling on government to do? How can we get to a solution?

Roger Pollen: 5:44

Well, the Bill contains an awful lot of really good solutions. And the problem will be though, that if they're imposed unilaterally just by one side, then we don't know how the other side or the EU will react against that, and whether they'll bring about restrictions and cause further problems. So the Bill proposes a thing called the green channel and red channel, which effectively means that if stuff was coming in from, from Britain, into Northern Ireland, that's only going to be consumed in Northern Ireland, it goes through the green channel, it's pretty much unfettered. Whereas if it's going through Northern Ireland into the EU, then it goes into the red channel. Now that seems a pretty sensible solution that's catered for in the bill, the EU, various people in the EU have also recognised that a green channel and red channel could be part of the solution. But unfortunately, the two sides aren't trying to reach that solution together. And there's where the problem lies.

Jon Watkins: 6:34

That's brilliant. Thank you, Roger. David Perry, of the FSB Insurance Service. Thanks, also for joining us, I'd like to turn to you. Now on this issue, the rising cost of insurance premiums is something that we've talked about on this podcast before. And understand FSB has just released a report with some pretty startling findings. What were the

David Perry: 6:56

Yeah. Good morning, John. And hello, everybody. The headlines of that? key findings were, as you say, quite concerning. The headlines, three out of five people that responded to the survey had seen their premiums increase, more than 50% of those people significantly. 30% of respondents said that they couldn't understand their policy wordings, and they found insurance too complicated. One in six of have had to find alternative cover from their existing arrangement, and have suffered cover reductions as a consequence. And we've seen particular problems in certain trades and certain classes. So for example, leisure and hospitality, the care sector, surveyors, financial services, entertainment, and also small specialist and niche businesses where a certain amount of time is needed to to underwrite the risk properly.

Jon Watkins: 7:58

I'm sure that causes a big headache when small business owners are trying to focus on their core activities running and growing their small businesses. But you know, what's the ultimate impact? You know, is there an issue here where potentially businesses can't get insurance? Or the the premiums are so crippling that it means they can't they can't function anymore? What's what's the real impact?

David Perry: 8:18

It's an interesting one, because small firms recognise the value of insurance. There are still 22 million pounds worth of commercial insurance claims being paid every day from Association of British Insurers statistics. So it's a it is an important piece of protection that businesses recognise they need to have. But of course, because of that, the knock on impacts are cutting costs. 24% of respondents said that they were cutting costs, obviously passing costs to other customers, which is a particular problem with the cost of living crisis on the go, opting for less cover. In some cases, not being able to trade at all, particularly where certain insurances are a requirement. And then of course, there are the false economies under insurance reducing sums insured, when at a time of, for example, hyperinflation in the construction market, you really don't want to do that in terms of your commercial property. And so on, if you own your building.

Jon Watkins: 9:23

And what can small businesses do to help themselves? Are there steps they can take to, you know, find a better deal or reduce premiums? What can they do themselves to help?

David Perry: 9:34

Well, commercial insurance is complicated. And over the years, I think there are lots of providers that have tried to simplify, but business and the work that we all do, it has complexity. So we would say don't review your insurances too late. Don't leave it to the last minute just before renewal. We'd suggest taking advice. It's always best to speak to someone that can actually guide you in the right direction in these circumstances, when you do talk to someone, provide as much information about what you do, where you do it, how you do it as you possibly can, because experts will be able to guide you in the right direction and tell you what's important, make sure you've got the right things in place. Always provide evidence of how well run your business is; security, health and safety plans that you have in place, business continuity planning, and so on. And then perhaps think about the risks that you can take yourself the most common one being perhaps a higher excess or something like that. There are blogs on the FSB Insurance Service website as well informative blogs that can provide you with a lot of this information as well. So we'd recommend that you take a look there, too.

Jon Watkins: 10:44

Now that's helpful. Thank you. And just finally, on this topic, David, what would you like to see government or the insurance industry do is there steps that you'd like to see them take to help small businesses?

David Perry: 10:56

Well, we've had a good link in with with both government, insurance industry in the form of Association of British Insurers, British Insurance Brokers Association, and the Financial Conduct Authority who regulate the pace, all very interested in what we've got to say and what our recommendations are, and the FSB are recommending earlier intervention when a market segment is seen to be failing, and also clarity around that intervention. A good example of that possibly is during the COVID crisis, very welcome intervention from the FCA. But then quite a lot of confusion with regard to things like whether grants and loans should be included in business interruption payments. So clarity around the first intervention, we feel that there needs to be a market study of professional indemnity requirements. This has been a particularly tricky area. Also, because lots of our members need professional indemnity cover to trade either as a result of their regulator or because customers or trade bodies would require it. We'd like to see government using the Procurement Bill to remove barriers for SMEs accessing public sector work. And this, for example, could be situations where huge limits of indemnity on public liability policies are required for a relatively small or relatively insignificant task. Finally, we'd really like to work with the insurance industry on clarity of wordings, and try to make insurance simpler for FSB members to understand.

Jon Watkins: 12:37

Yeah, I think that's something that a lot of small businesses would certainly appreciate. Thank you, David. Now, an issue that none of us can have avoided in recent weeks as the Conservative Party leadership contest, and ultimately the race to become the new Prime Minister. At the time of recording, we are down to the last two: Rishi Sunak and Liz Truss, David Hale, Head of Public Affairs, FSB, I'd like to chat a little bit about that contest, as well as what FSB would like to see from the new PM, whoever that ends up being. First of all, how will the remainder of this contest work? I mentioned that we're just awaiting the final ballot. On the last two, when will we have a new Prime Minister?

David Hale: 13:24

Hi, John. So we'll have a new Prime Minister on September the fifth, that's when the results of the contest will be announced. And it will either be Liz truss or Rishi Sunak. The ballots though that went when the contest is determined actually go out on the first of August at the start of the month. So really, we're likely to have people voting in that first week of August and it will be effectively decided then, but voting doesn't close until September the third and we won't have a new Prime Minister till September the fifth.

Jon Watkins: 13:58

Okay, good to know, for busy small business owners who might not have had the time to keep across every detail of this, what kind of things have each of the two finalists been saying about their approach to business and the economy?

Unknown: 14:13

So the biggest dividing line of the leadership contest as a whole has probably been on on tax. So Liz Truss has said that she will cancel the National Insurance hike that came in. She said that she will stop the planned rise in Corporation Tax. And she said she'll do a new spending review which covers all all government spending for usually a three year period. Rishi Sunak has taken a different tack, he's said that he doesn't want to cut taxes until inflation starts to fall. He has a tax plan that he actually published while he was while he was still Chancellor, which is looking particularly at how to change taxes and things like capital investment and skills payments and to an extent R & D. So, So Liz trust is really saying, I'm going to cut taxes now. And Rishi Sunak is saying, Wait, and he has got a different different set of taxes in mind, including income tax, but also taxes on capital investment.

Jon Watkins: 15:24

Yeah, brilliant. Thank you. Now, you know, it is only Conservative Party members voting at this stage, but whoever gets in is likely to be held to account pretty soon we do have a general election in a in a couple of years. What will small businesses hope for from the new Prime Minister when they're in post? And what is FSB hoping for from that new prime

David Hale: 15:50

I mean, I think the key thing is that is the cost of minister? doing business crisis at the moment, I think costs are going up from every single direction, whether that's insurance, whether that's things like tax, or whether that's input costs and materials, or whether that's difficulty getting hold of people. And I think what small businesses I think will be looking for is a government that will will come in on on day one and grip as many of those issues as they can and make progress from a government perspective in terms of what government can do to help businesses cope with spiralling costs and help people develop their businesses over the next two years and and get going and get growth going across the economy.

Jon Watkins: 16:37

Yeah, brilliant. And I know that FSB does a regular temperature check on small business confidence and sentiment, the Small Business index. And I think your last one of those was quite recent. What was that? What were the headlines to come out of that? And does that correlate with those concerns around rising cost of business, for example?

David Hale: 16:59

It does, it does. So it was you know, it was not positive temperature check. It was showing businesses under increasing pressure, you know, just the headline measure of confidence was, was 40 points down on this time on the same time last year. And you know, it was showing confidence being worse now than when there if you remember the Omicron variant coming in just before Christmas, and then it looked like we might be potentially going into another lockdown, which then didn't materialise. But it is showing quite a serious situation in terms of how easy or not small businesses are finding, dealing with, with costs and the current situation, so that was not a positive temperature check, and we would, hope a government would come in, see that there's a problem there and then try and try and deal with it. And that's what we'd like to see from from either Liz Truss or Rishi Sunak, whoever it is that that gets the vote and gets in as the new Prime Minister.

Jon Watkins: 18:01

Yes. And as you say, in September, we will know exactly who that will be. Thank you to all of our guests for joining this episode, to both Davids and to Roger, that was really great, and some really interesting, hot topics explored for our audience. Thank you also to our audience for listening to this episode of the Small Business monthly roundup podcast. While I have your attention, I would just like to remind you that you can subscribe to the First Voice podcasts to receive regular updates and guidance on the big issues affecting small businesses and do please also remember that you can find a whole host of additional webinars, podcasts and other content on the First Voice website at first voice.fsb.org.uk Many thanks for listening.