Livingstone's e-business adviser a 'waste of time', says analyst

Mark Simmons, a senior analyst at Bloor Research, talks to UKTECH about why he thinks the appointment of an 'E-business advisor' is a waste of time, how the Government has made it a "nightmare to be a contractor" and what the link is between IR35 and the current UK skills shortage.

Ken Livingstone, the Mayor of London, has recently appointed an E-business advisor, Colin Jenkins, to advise the Greater London Authority on encouraging dot com businesses to move to the capital. Jenkins is on secondment from carrier Energis, where he was director of strategy. Another part of Jenkins' role as advisor to the GLA will also be to attempt to address the capital's IT skills shortage.

Mark Simmons was outspoken on the issue of the new appointment and was additionally willing to put his head above the parapet over what he saw the current, more general problems as being...

UKTECH - Why do you believe the appointment will be a waste of time?

MS - "I cannot see why an appointment of an E-business advisor should make any difference. The development of the E-business world has been in turmoil and is now settling down. It is reliant upon investors in the form of IPO's and reliant upon regulation. Both of which are out of Ken's control. Ken's manifesto as I understood it, was predominantly transport, tube trains, congestion, cheaper housing, better emergency services and a much improved quality of life for Londoners. A tall task for anyone, but this should be deemed as the most important, not E-commerce with no control."

UKTECH - Is Ken Livingstone jumping onto a bandwagon to drum up media attention and support?

MS - "E-commerce is starting to evolve with a stronger foundation in comparison to the bubble that existed previously and burst. As it is taking a more positive and prosperous shape a lot of people will use it as a media vehicle. I think Ken would do better with the hype of a different kind and there is plenty to choose from the tasks he set in his manifesto."

UKTECH - Can you expand on what you mean as 'the correct investment from the industry' in order for E-business to grow at its own rate?

"The skills shortage is growing day by day, week by week and no one seems to care" - Mark Simmons talking of the effects of IR35

MS - "Correct investment has evolved over the past few years from the dot com bubble bursting. Investors are now, and should be, looking at dot com start-ups and expansion programmes in greater detail, as they would with traditional investments. The dot com must then have a plausible and well thought out business plan that leads to long term success. This will attract sound and solid backers, and has a better chance of success. We shall see the UK leading the way with E-commerce, but it will evolve differently and be far superior. Look for long-term gains, not short, are the words of advice to any E-commerce investor. The growth and reputation of UK E-commerce companies has already overtaken the European mainland, by a long way."

UKTECH - What effects do you believe IR35 and the skills shortage are having and will have in the future on this rate of growth?

MS - "The skills shortage is growing day by day, week by week and no one seems to care. IR35 has not helped at all. Companies and governments must remember that almost all great construction projects, and that includes the building of an IT infrastructure, is reliant upon contractors. No one seems to recognise that contractors have developed skills that cannot be intellectually challenged or stimulated by a permanent position within a company. They often use their skills in a company to overcome a requirement for a particular problem that no one else can solve. The contractor, when finished will move on to the next task, that task may be with the same organisation, or somewhere totally different."

"Contractors do suffer some abuse from employees of companies they are contracted to, they receive no benefits and pay costs of accountants, administration, advertising, job hunting and risk their future well-being constantly. They also have to pay tax on profits, National Insurance, employee as well as employer contributions and all sorts of insurance and health cover. It is a nightmare as a contractor."

"To introduce the IR35 has just added a great 'insult to injury', more administration, limited travelling costs, uncapped NI contributions, 24 month rule and being dictated to about how much can be spent on running the company. This is 'bye-bye' to the entrepreneur, and 'hello' to the permanent employee. So what do you think these highly skilled gurus are going to do? Leave or go permanent, keep the income and leave or lose the hassle and stay?"

"The Government's fast track scheme of skills from abroad to fill this gap will not work effectively. The contractors are going abroad because of shortages overseas, also no-one would want to come to this country when America is an option, with lower taxes. It is not head count and cost, it is skill and excellence. The shortage is growing at a rate that will become irreversible, what happens then I cannot foresee, the only known factor is, the highest bidder will win, so costs to companies will go up dramatically."

"The Government has taken a generalistic view to a problem of a few contractors 'fiddling' the system. Unfortunately the cost is going to be reflected on them. They should have taken a simpler approach, such as: 'no-one can claim more than 25% of revenue as dividends'".

"I am sure the cost of administering this regulation has not been calculated by the enforcers. They should not fool themselves with juggling figures, but should include the amount of SME businesses that disappear who provide contract services, the cost to business who employ contractors as the rates are now being increased to counteract the IR35 legislation. They should also consider the quantity of businesses that fail because their IT infrastructure has failed and they cannot afford any skills as well as the cost of additional inspectors and Inland Revenue IT changes provided by the reduced contractor workforce."

---

Bloor Research is an independent research and consultancy business.

--

Richard Powell, UKTECH