UK local elections 2022 – the impact on small businesses

Flexible monthly business insurance
17 May 2022
8 minute read

What are local elections for?

Local elections in the UK are a curious beast, often written off as being of less consequence than the more important general election. Turnout tends to be much lower than in general election years, with turnout at the 2018 UK local elections coming in at just 35%.

Also, much like in the USA, local races in the UK in the years in between general elections (known across the pond as the midterms) are seen as a barometer of public opinion about the government of the day. Despite not being on the ballot in 2022, the premiership of Boris Johnson is widely seen as being on trial during these elections, with the results seen as an early (albeit not necessarily accurate) predictor of the mood of the electorate ahead of the next parliamentary elections.

Local elections are held here in the UK to elect various public figures and bodies, including:

  • District councils
  • County councils
  • Unitary authorities
  • London borough councils
  • Metropolitan borough councils
  • The Northern Ireland Assembly

Not every council, mayorship or local authority is up for election, as terms of office are staggered throughout the country, but a significant number of positions in local government will be decided through this election.

The Institute for Government has created a useful explainer guide to how local government is structured in the UK.

How can local elections affect small businesses?

It’s worth asking the ways in which changes in the makeup of local authorities can actually affect the day-to-day operations of small businesses. Much of the legislation and regulations that govern how businesses can operate are set by the UK government and passed through parliament in Westminster, or by the devolved governments of Wales, Scotland and Northern Ireland and their respective assemblies.

Let us run through the ways in which local authorities impact businesses in their areas, and how a change of local government after the elections could change this relationship.

Local councils collect business rates

Much like private households have to pay council tax to their local authority, businesses that operate out of a physical location have to pay business rates to the local council. The local government does not actually set the level of business rates – this is done by the central government – but your local council does collect the money, and keeps 50% of it to spend on the local area.

Each council will have different spending plans for the money raised by business rates, but depending on who wins the 2022 elections, the way in which your businesses money is spent can change dramatically.

Also, while local authorities are not able to determine for themselves the amount that businesses will have to pay in business rates, who wins the local elections and controls the council can have a great impact on how information about appealing against the valuation of your business premises (for the purposes of calculating your rates) is communicated. Changes in local government could also impact how much support small businesses get with applying for small business rates relief.

Planning applications

A significant area in which local authorities can impact businesses in their area is through the process of applying for and granting planning permission. This is highly relevant if your business is considering building new premises or extending your existing premises. Similarly, if you are a sole trader or small business looking to convert your residential home into a place of business, you will also need planning permission.

The process for obtaining planning permission for business premises may differ slightly in each council, but as an example Ealing Council has laid out its criteria on their website.

How the election results turn out can have a significant impact on the process of obtaining planning permission in a local area. Some parties have made manifesto commitments to reduce an oversupply of retail units in town centres, reducing the number of empty shops and turning space over to become parkland or community hubs. Others will make commitments to use the power of local government to encourage new businesses to take over empty shop units through startup loans and low-rent schemes.

Support, subsidies and grants

Local authorities are also in a position to offer small businesses support in the form of grants, loans and subsidies for enterprises in their area. Ever since the catastrophic impact of the Covid-19 pandemic on businesses, trade bodies and small business groups have been vocally calling for the parties contesting the elections to commit to greater support for businesses. The Federation of Small Businesses (FSB) has even produced a report entitled 'Local Leadership', outlining how local authorities can best support businesses in their area.

Central government support will always tend to be more limited and less targeted than the support available at the level of local government. Because of this, local authority support for small businesses is paramount in helping those enterprises survive not just the aftermath of the pandemic, but also the significant external pressure placed on businesses by rising energy costs, rising wholesale prices and delays in the import and export of goods.

Keith Findlay, Deputy Business Editor at the Press and Journal in Aberdeen, summed up the situation well, saying:

Given proper support, they (small businesses) can and will adapt and survive, and much of that support must come from their local councils.

Spending power in the local economy

By collecting council tax and business rates, local authorities have considerable spending power within the ecosystem of a local economy. Small businesses in Scotland, for instance, are calling on the party that wins the local elections in the Highlands area to increase the value of the goods and services they buy locally by 2% per year. It’s estimated that this uplift in spending would add £5.8million to the local economy in just one year.

One of the more controversial issues that affects businesses when it comes to the spending power of local authorities is simply the personal spending of the thousands of workers that many local authorities employ. The Scottish Federation of Small Businesses (FSB Scotland) is calling on the winners of local council elections to call for an end to a work-from-home as standard practice for council employees so they return to their offices and start spending money in the local economy once more.

The results of the 2022 local elections

Jow that the dust has settled and the results are in, we can confirm that the Labour Party (+22 seats), the Liberal Democrats (+194) and the Green Party (+63) have made the most significant gains in councils throughout the UK. The Convervative Party has, as was widely expected, lost the largest share of council seats (-336) seats, though the extent of the losses has not exceeded what was predicted prior to the vote.

Labour’s biggest gains have been made in the London boroughs, with traditionally Conservative councils in Westminster and Wandsworth have both flipped to the Labour Party. Meanwhile Keir Starmer’s party did not fare as well as they might have hoped in some northern councils. Hull council for example, which has been under Labour control for most of the last half century, goes to the Liberal Democrats.

The results of these elections are what might be termed 'hyper-local' with the national vote share between parties not being entirely relevant. However, the split across the entirety of Britain was roughly:

  • Labour 35%
  • Conservative 30%
  • Liberal Democrats 19%
  • Others 16%

What do the results mean for small businesses?

With 4,411 council seats being contested across 198 local councils, it is impossible to break down exactly what the election results may mean for small businesses in any particular local area, but the changing of hands between parties in a number of councils around the UK will inevitably impact the relationship between the local authority and the local business population.

Check the results as they come in for your area.

A local case study – Westminster

Let us focus in on one single council that has changed hands because of this election to see how the results may affect small businesses.

The previously incumbent Westminster Conservative party prioritised “support for local entrepreneurs and pop-up businesses” and the “delivery of skills and training” to help people start their own business.

The main challengers, the Westminster Labour party, made manifesto pledges to “reduce overreliance on chain retail”, “support union recognition” and “ensure that planning policies support local employment”.

Labour have now taken control of the Westminster council for the first time, meaning that changes in council policy in areas such as planning permission for commercial premises may be on the horizon.

What about Northern Ireland?

It is perhaps in Northern Ireland that the 2022 elections are at their most significant and consequential. Unlike in England, Scotland and Wales where only local council and mayoral elections took place, voters across the Irish Sea cast their ballots for the Northern Ireland Assembly, the devolved national legislature.

For the first time, the nationalist party, Sinn Fein, has won the most seats with 27, beating the Democratic Unionist Party (DUP) who picked up 25 seats. This means that a party that supports the reunification of Northern Ireland with the Republic of Ireland will theoretically lead the power-sharing government at Stormont for the first time.

However, under the terms of the Good Friday Agreement, both unionist and nationalist parties must share power in a joint government and currently the DUP is refusing to move forward with power sharing until their concerns about the Northern Ireland Protocol in the Brexit Agreement are addressed.

So what does that mean for small businesses? Well, in the short term, a Sinn Fein win may bring about the possibility of changes to legislation in Northern Ireland that would impact businesses of all sizes. Sinn Fein have made manifesto commitments to:

  • Ban zero hour contracts
  • Remove restrictions on trade union recognition in workplaces with 20 workers or fewer
  • Devolve powers from Westminster to increase the minimum wage with the Real Living Wage

Whether or not Sinn Fein are able to achieve all or any of these manifesto commitments remains to be seen. However, each of these commitments, should they eventually be implemented, could have an impact on small businesses in the country, particularly those of 20 employees or fewer, that are paid the minimum wage and do not have fixed working hours in their contracts. For any businesses that fit this description, operating costs could potentially increase.

The impact on businesses of any potential unification of Northern Ireland with the Republic of ireland could be seismic. However, whilst a Sinn Fein win moves the needle a little in terms of the likelihood of reunification, any such move would be a long way off and and require a border poll in both the north and the south of Ireland.

This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.

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