The number of small firms planning to decrease investment has hit an 18-month high, according to new research from the Federation of Small Businesses (FSB).
It was announced this morning that UK business investment fell to £46.1 billion between Q4 2017 and Q1 2018.
Seven in ten (69%) small firms are not planning to increase investment over the next three months. One in seven (14%) are planning to decrease investment, the highest proportion since Q3 2016.
Almost two thirds (61%) say they are operating below capacity, while more than seven in ten (71%) report a rise in operating costs this quarter. The figure is up 10 percentage points compared to the same period in 2016 and is close to the record-high proportion recorded six months ago (74%).
Last month saw a rise in both minimum wage rates and auto-enrolment contributions for employers, as well as an increase in business rates for thousands of small firms.
FSB National Chairman Mike Cherry said: “It’s hard for small firms to invest when £14 billion is being withheld from them due to late payments. If all of your working capital is tied up in invoices, then clearly you won’t have the cash needed to invest for the future. Following the collapse of Carillion, big corporations need to realise that late payments aren’t a smart move, they’re a threat to our economy.
“Last month saw thousands of small firms hit by increases in minimum wage rates, auto-enrolment contributions and business rates. Meanwhile inflation remains well above the government’s two per cent target. Small businesses are seeing margins squeezed, leaving less to invest in the technology, training and research they need to increase productivity.
“The incentives to invest are there but they’re not being accessed by the small firms that really need them. More than half of small firms haven’t even heard of R&D tax credits, for example, and bigger firms tend to be better at completing the complex process of applying for them.
“On top of all this we still don’t have a clear sense of what our future relationship with Europe looks like, making it harder to invest for the years ahead.”