Government must halt slide in small business confidence say FSB

Mike Cherry FSB

The Federation of Small Businesses (FSB) is urging the Government not to revisit shelved plans for tax increases on the self-employed as its latest Small Business Index (SBI) shows confidence dropping among members.

The SBI is down to +15 in Q2 2017 from +20 in Q1, marking the first fall in the index since the wake of the EU referendum.

When asked about threats to expansion plans, small firms are most likely to raise the domestic economy. More than half (52%) see it is a barrier to growth. Consumer demand (30%), labour costs (24%) and the tax burden (17%) are also commonly flagged.

Operating costs for small businesses are now at their highest in four years. A net balance of 66 per cent report increased operating costs in Q2 2017, up from 53 per cent in the same period last year.

Mike Cherry, FSB National Chairman, said: “Small businesses were feeling more pessimistic even before the General Election was called. Now alongside increasing inflationary pressure, a business rates revaluation and rising labour costs, they have a whole new wave of political uncertainty to contend with.

“Clearly this is not the time to revisit failed plans for a national insurance hike on the UK’s 4.8 million self-employed. These strivers are the engine of our economy. In this unforgiving climate, the last thing they need is increased cost. This would act as a disincentive to business creation.

“Many small firms are still reeling from the business rates revaluation that took effect in April. The £300 million hardship fund announced at the Spring Budget to help those worst effected offered a glimmer of hope, but is yet to materialise. With the election out of the way, there’s absolutely no excuse for local authority debt collectors chasing small businesses for incorrect, over-inflated bills without the emergency relief applied. The Communities Secretary needs to make distribution of this fund his top priority.”

The latest SBI is characterised by imbalances in confidence between different UK regions and business sectors. The East Midlands (+35), Wales (+31) and London (+25) have the highest regional confidence readings, while Yorkshire (+14), the North West (+9) and Scotland (-4) are among the lowest.

Small firms operating in the information and communication (+43) and manufacturing (+36) industries are some of the most confident this quarter. Meanwhile, consumer facing businesses, such as those in the arts (-4) and retail (-9) sectors, have seen sharp drops in optimism.

Mike Cherry added: “Consumer facing businesses are really starting to feel the squeeze. Many small firms that operate in the retail and hospitality sectors depend on EU 27 workers. Ensuring these vital employees have the right to remain needs to be a first port of call once Brexit talks launch.

“For decades we’ve heard Governments discuss the need to create a balanced economy. It’s time for meaningful action. Too many small businesses, particularly in the North, are being held back by derisory investment in infrastructure, connectivity and skills. We look forward to working with the new administration on an ambitious Industrial Strategy which prioritises productivity growth across all regions of the UK.”