Buying a Small Business in the UK
31 Jul 2024
Why Buy a Small Business in the UK?
Despite the economic ups and downs of the last few years, the UK market still offers some lucrative opportunities for entrepreneurs. Incorporating a business in the UK is only £50, meaning the barriers to entry are low compared to other nations. The inexpensive cost, combined with a strong legal and financial system are just some of the reasons why the UK still presents a solid option for business owners. Along with this, there are also several regulatory measures instilled by the UK government, in an attempt to make the UK a stable place for business owners. Let’s explore the acts put in place to help business further:
Solid Legal and Regulatory Base
The Companies Act 2006
Brought in to ensure transparency and accountability to business owners in the UK, the Companies Act requires all business owners to provide full financial statements each year and keep accurate records. That way, fraud, and financial misdemeanors are reduced. The act also offers protection for minority shareholders and provides a framework for the formation, management and dissolution of companies.
The Small Business, Enterprise and Employment Act 2015
Introduced in the not-too-distant past, the Small Business and Employment Act 2015 aims to simplify the regulatory framework to provide better access to finance and support. What does that actually mean?
Well, it’s intended to reduce late payments and make company registration easier whilst increasing levels of transparency in corporate ownership. It’s designed to help small businesses manage their cashflow by addressing late payment issues by making it a requirement for larger businesses to report on their payment practices.
Checkout our Complete Guide to Buying a Business here.
Smooth Access to Funding
Along with a solid regulatory backdrop, the UK Government is supportive in the funds it offers to new businesses. Let’s take a look at some of the funding that’s out there at the moment:
The Start-Up Loans Program
The Start-up loans program was introduced in 2012 to help entrepreneurs find their feet with new business ventures and help stimulate the UK economy in the process. Loans range from anywhere between £500 and £25,000 and have a fixed interest rate of 6% per annum for business owners.
Alongside the funding, the program includes free mentoring and guidance on developing business plans that are aimed at helping entrepreneurs navigate those tentative first steps. It’s fair to say the program has helped support lots of businesses in the UK since its inception, having issued 75,000 loans, totaling around £623 million.
Enterprise Finance Guarantee
The Enterprise Finance Guarantee is another government-backed initiative aimed at supporting small businesses that lack sufficient security to obtain a traditional bank loan. The government guarantees the loan enabling the business to access the required funds. The scheme offers loans ranging from £1000 to £1.2 million usually over a period of between three months and ten years, offering lots of flexibility for business owners.
Since it kicked off, the scheme has supported around 35,000 loans, to a total of around £3.3 billion. This funding has been essential to many businesses across the UK, providing vital capital that would otherwise be difficult to obtain.
Strong Infrastructure
Alongside a strong regulatory base and access to funding for business owners in the UK, entrepreneurs can also benefit from the solid foundations the UK is built on. What do we mean by that? The infrastructure of roads, railways, and information technology such as broadband networks that keep the UK ticking. Although it may be taken for granted by many, for business owners it provides an advantage from day one, helping operations run smoothly.
Transport Links
The government agency Highways England is dedicated to maintaining and improving the motorways and roads in the UK. Recent investments include a £27 billion budget for road improvements between 2020 and 2025, aimed at reducing congestion and improving connectivity across the country.
How does this help businesses? Well with better transport links, businesses can manage logistics more effectively by reducing delivery time and costs. For companies operating on a large scale, this could make a huge difference to the operational efficiency of the firm. For instance, better road networks enable faster transportation of goods, while enhanced rail services facilitate quicker commutes for employees and customers.
Alongside this, better connectivity means small businesses can expand their operations and customer base to national and even international markets.
Transport links are often taken for granted in the UK, but for businesses of all sizes, when they work well, they make operations run much more smoothly, both for transporting goods and also helping employees commute.
Broadband and 5G
The UK government has been heavily investing in broadband and 5G technology, with the ‘Superfast Broadband Program’. The government hopes to provide superfast broadband to 95% of UK premises as a way to ensure small businesses, even those in rural areas, have reliable internet access. Nowadays fast internet is crucial for modern operations, and the UK’s extensive digital infrastructure helps position it ahead of many other nations.
As a result, it enables businesses to operate smoothly and efficiently, removing one more barrier to business owners looking to set up in the UK.
Moreover, the rollout of 5G technology further enhances the UK’s appeal to business owners. With promises of faster internet speeds and improved connectivity, 5G supports advanced digital business operations such as online sales, cloud computing, and remote working capabilities.
This hopes to give UK businesses a competitive edge, allowing them to stay ahead in a rapidly evolving global market. These advances underscore the UK’s commitment to fostering a business-friendly environment, making it a more attractive place for entrepreneurs than other countries.
Things to bear in mind
While the UK offers many advantages for starting a business, there are some challenges to be aware of. The regulatory environment, although generally supportive, can still be complex, particularly for compliance with tax laws and employment regulations.
That’s why before making the leap, it’s worth speaking to one of our tax experts to see if buying, or starting a business is right for you.
We hate to bring up the B-word, but uncertainty around Brexit also continues to pose risks, affecting trade agreements and potentially leading to fluctuating tariffs and regulatory changes.
Additionally, the high cost of living in major cities like London can be prohibitive for startups which may influence the decision to set up operations there.
Although there are lots of methods of funding in the UK, it’s still worth bearing in mind that getting financing as a new business without an established credit history can be a challenge.
Finally, the competitive market environment means that businesses must be innovative and efficient to thrive.
But ultimately, buying a business or setting up a business in the UK comes with its own unique risks, and its important to be prepared.
To speak to one of our legal experts on how to buy a business in the UK, get in touch now.
Check out all there is to know about Buying a Business in our Complete Guide to Buying a Business.
