Small IT Businesses
There is a great need to be able to turn small IT businesses into much larger ones.
According to the Government, there are 70,000 to 125,000 IT businesses in the UK. I don‘t know why there is such a wide range, but the gap looks to be not much short of the number of contractors who are out of work.
However, we won‘t snipe. It‘s time to be positive.
Most of those tens of thousands of businesses are small IT businesses. There are very few large IT businesses in the UK. At a recent Regent Associates conference, it was stated that there was very little IPR in the UK as regards software.
In fact the speaker said that there were very few software companies in the UK with a value of over 100 million – which is only the value of a good BMW dealership in the UK.
Growing Small IT Businesses
So, there is a problem. There seems to be plenty of small IT businesses – but very few are making it through to become large IT businesses.
The Government could do with some help – from those who know better than anyone else what those small businesses want, in order to be able to make the jump from small to large businesses.
The Government has had plenty of advice before, from other representative organisations in the IT industry, e.g. large IT businesses, the big consultancies and agents‘ representatives.
Now we have the opportunity to give the Government our advice on how to help us to help ourselves, the country, and the reputation of the Government. It could also give the Government the opportunity to win back many of those votes that they have lost in the last few years because they have pursued policies, e.g. Work Permits, that have put many thousands of IT contractors out of work.
To kick it off on this site, here are my suggestions. If you have any suggestions, please put them in the Comments section.
1. More Training for Small IT Businesses
The Government should operate a re-skilling program for those in IT with old skills who cannot find work. This should be for permanent employees and contractors alike. It should be run like the old TOPS courses that used to re-skill people from outside IT.
We all know that it is impossible to find a job or a contract after just doing a course in a new skill. This new re-skilling program would not just entail a course. It would be, like the TOPS courses, 10 weeks long, and involve work on a real project after initial training.
It could also involve a couple of weeks spent at a client‘s site. This happened with the TOPS courses and gave clients an opportunity to look at potential employees or contractors free of charge. As a result, many of those who went on TOPS courses got taken on.
More Funding for Smaller IT Businesses
So how would this be funded? We shouldn‘t be going to the Government with an open palm asking for handouts, if we can help it. I would suggest two possibilities:-
a) The Government would receive a fee from the companies who took on those people with the new skills. If the skills are in short supply, then I‘m sure that they wouldn‘t mind paying as they usually have to pay an agency fee anyway.
b) Just as university students pay back Student Loans, then contractors and permanent employees would have to pay back the money for the course when they obtained employment
I would also suggest that any companies who took on non-EU IT workers, should also be ‘˜encouraged‘ to take part in this new TOPS-like scheme by participating with the Government in giving that short burst of work experience (two weeks) to re-skilled IT workers
I‘m sure that the Government, who are very keen on Education, would look at this seriously.
2. More Taxation Help
The Government should accept that freelancers are going to be out of work for long periods – especially during a downturn. Boxers are allowed to spread the money they earn from their fights over several years for taxation purposes. The Government could expend this to contractors too.
This would mean that if a contractor earned 80 grand one year and nothing the next, he or she could spread the taxation over two years and get a rebate the next year, as well as getting all the tax allowances twice
Remove Restrictive Contract Clauses
One of the main reasons that contractors‘ small IT businesses are not able to make the jump from being small businesses to large IT businesses is because most of them go through agencies – who put very restrictive clauses on their contracts, preventing the contractors from seeking fresh business from the client both during the time spent on the contract and for up to a year afterwards.
I‘ve no idea how legal these clauses are, and I understand why agencies put these clauses on. However, I also know that they severely restrict contractors from looking for other business at the clients where they go.
For three years I was CIO at a company in the Midlands. If contractors had come forwards with a proposal for new business for themselves which would have benefited the company, I would have given their proposals serious consideration.
Not one did come forward though in the whole three years. The reason was that they didn‘t consider that they could – because of the restrictive clauses in their contracts. This problem might also be taken up with Atsco for a resolution that benefits agencies – without strangling tens of thousands of potential larger IT businesses at birth.
What About You?
Those are my three suggestions. Does anyone else have any more? This is the time to put them forward.
Ad – Contractor Services
If you think you can benefit from using an umbrella company, try the following:-
Do you need some professional advice on which umbrella company is right for you? Do you want to get better returns from your Umbrella Company? Fill out the form below to receive expert advice.
For all necessary business insurance, including IR35, try Business Insurance for Contractors