For the third consecutive year, The Legal Director is running its Legal Survey to discover how SMEs understand and manage their legal affairs and what they perceive as the greatest legal risks when managing their businesses.
Reflecting responses from previous years, this year’s survey is more expansive on cybersecurity and GDPR to give better insight into what measures SMEs are taking to protect themselves against the critical threat of cyberattacks. There is also a section on AI, to ascertain how far SMEs are capitalising on the efficiencies and opportunities the new technology brings and how well they understand the legal implications of using AI in their business.
With a new government in place and a swathe of new legislation sweeping in, how do SMEs feel about their state of health and how well are their legal frameworks responding to the changes?
People
In both previous surveys, people have emerged as the number one priority for SMEs. Attracting and retaining employees was cited as the biggest employment challenge for two consecutive years, so the need to recruit with clarity and hold on to good employees is of vital importance to SMEs.
Employment law is seeing significant changes this year and it will be fascinating to learn what impact this is having on SMEs. Consultation for Labour’s new Employment Rights Bill starts in 2025. Described as “the biggest upgrade to workers’ rights in a generation”, it includes 28 employment measures and runs to150 pages. How well prepared are SMEs for these changes? How on top of their contracts, policies and employment procedures are they? And who is helping them with this? Are they reliant on HR, do they bring in external legal support, or are they using fractional legal services?
Business Growth
The survey is hot on the heels of Rachel Reeve’s first budget, and it will be interesting to gauge SMEs’ levels of optimism following the measures it introduces. Behavioural Economist Roger Martin-Fagg terms it a “growth budget” which is funded by “a large and sustained increase in taxation”. The increase in National Insurance contributions will undoubtedly hit SMEs hard and, with this being recently introduced, the survey results may reflect their anxiety around this. However, previous survey results have shown SMEs to be a resilient group, with 65% of 2023 survey respondents purporting to feel more confident about their prospects than a year ago despite years of financial challenges.
Environmental and Social Governance (ESG)
While there are still no legal obligations for SMEs to measure, report on, or reduce emissions, there is increasing pressure to consider their environmental impact. Larger businesses, required to adhere to stricter reporting requirements, are scrutinising their own supply chains and demanding to know the emissions of the businesses who deliver to them. Likewise, UK lenders, investors and insurers are increasingly assessing companies on these grounds.
ESG has been climbing the agenda for years, but will the 2024 legal survey results reflect this? Are SMEs introducing sustainable practices? Have they conducted a risk assessment or ESG audit? Answers to these questions will paint a picture about how seriously SMEs take their environmental and social responsibility.
Take Part
If you would like to take part in The Legal Director’s SME Legal Survey, please submit a response here.
The survey is open to all UK-headquartered, SME businesses and as an added incentive, TLD will donate £50 to their nominated charity – Barons Court Project – for every completed survey. The Legal Director will share insights from the survey in the new year.