Uncertainty in UK Policy Creates Investment Overhang for Small Businesses

Kunal Shah, co-head of Goldman Sachs International, has warned that sustained uncertainty regarding government policy on tax and regulation is discouraging small business investment in the UK. Speaking before a House of Commons reception marking the fifteenth anniversary of the bank’s 10000 Small Businesses management training initiative, Shah cited concerns among entrepreneurs about higher taxes and changing employment regulations. These factors, he noted, are encouraging caution around investment and recruitment.

Shah highlighted that many business owners remain fundamentally optimistic about their own prospects, focusing on elements within their control. Despite this, ambiguity over manifesto pledges, particularly those affecting employment rights, is undermining broader business confidence. The Labour Party recently revised its proposal for day one rights for unfair dismissal, opting for a compromise that reduces the qualifying period for such rights from two years to six months. Clarity on this issue was welcomed, yet Shah stressed that wider fiscal uncertainties remain a challenge for entrepreneurs navigating the UK’s evolving regulatory environment.

Economic conditions further complicate matters. The UK’s sluggish economic growth and persistent inflation, combined with interest rates that continue to restrain business borrowing, have added to the difficulties faced by small companies. Shah acknowledged some positive developments, such as recent trade agreements with the United States and India and short term stability in business taxation. However, he suggested that these benefits are tempered by the country’s structural productivity issues and cost pressures.

As co-chief executive with Anthony Gutman, Shah oversees Goldman Sachs’ ongoing commitment to small business development. The firm’s management training initiative has provided over 2500 companies with more than £250000 in annual turnover and small teams with access to 100 hours of free training. Research from Professor Mark Hart of the Enterprise Research Centre suggests that, after three years, participating firms increase their revenues by an average of 43 percent and remain 14 percent more productive after a decade than comparable businesses. The government’s similar Help to Grow scheme, with funding in place until 2029, has supported 10000 business leaders since 2021.

Shah expressed support for the government’s efforts to consult with the financial sector on boosting economic competitiveness. He pointed to initiatives aimed at revitalising UK capital markets, including a recent stamp duty holiday for newly listed companies, as evidence of proactive policymaking. Measures such as these, Shah observed, are reassuring to markets seeking stability amidst shifting fiscal priorities.

Goldman Sachs continues to occupy a leading position in mergers and acquisitions, with data showing involvement in transactions exceeding $1.5 trillion globally. The bank advised on the recent £1.9 billion flotation of Shawbrook in London, the largest in several years, with further prospective listings anticipated. While not engaged in every high profile deal, the firm’s activity within advisory and capital markets remains robust, and the outlook suggests continued strong performance into the next financial year.