Tuesday, June 2, 2020

Chancellor urged to use autumn budget to reverse slump in small business confidence

The Federation of Small Businesses is calling on Chancellor Sajid Javid to bring forward radical interventions to address an unprecedented long-term slump  in small business confidence, slowing economic growth and and a widening trade deficit when he publishes the 2019 Autumn Budget early in November.

Writing to the Chancellor, the group calls for a major reduction in business rates bills for small firms, as thousands struggle to stay afloat amid spiralling operating costs.

FSB recommends that the Retail Discount – which allows small retailers with rateable values of up to £51,000 to claim a 33% discount on their rates bills – be increased to at least 50%, made permanent and extended to small firms operating in other sectors, including manufacturing.

It is also calling for the threshold for Small Business Rates Relief to be increased from £12,000 to at least £30,000. The threshold has remained largely static in recent years, despite the Rateable Values that determine rates bills surging in many parts of the country, particularly on high streets in large towns and cities.

FSB National Chairman Mike Cherry said: “Small businesses have been left hamstrung by uncertainty for the past three years. We need to see the Chancellor step-up to the mark next month with measures that will reinject optimism into the small business community and enable growth. Otherwise, we’re in for a very bleak winter.

“Business rates reform must be a priority. This unfair, regressive tax – which hits firms before they’ve made their first pound in turnover, let alone profit – continues to threaten the futures of small firms all over the country. We’ve secured important business rates mitigations in the past, but now is the time for a significant reduction in small business bills.

“Fundamentally, the business rates tax serves as a disincentive to invest. You spend money on bettering your property – by installing solar panels, or improving workplaces, for example – and the next thing you know your rates bill has shot up. It’s ludicrous.”

FSB’s Autumn Budget submission also highlights the increased strain that rising employment costs are putting on small firms.

Following April’s increase in minimum wage rates and employer pension contributions, the number of people in employment fell by 56,000 last quarter. FSB recommends that the £3,000 discount on national insurance bills available to small firms through the Employment Allowance be increased each time a new member of staff is taken on, with an additional £1,000 made available for every new recruit until a £13,000 annual cap is reached.

Elsewhere, the group is calling for direct financial assistance for small firms impacted by Brexit uncertainty in the form of £3,000 export vouchers, which could be used to claim back the costs of expert advice, market research and trade roadshows.

Other FSB Autumn Budget submission recommendations include:

  • Delaying the roll-out of changes to where responsibility for determining IR35 status lies in the private sector, set to take effect in April 2020
  • Freezing fuel duty and the Insurance Premium Tax (IPT)
  • Ensuring all small businesses have access to broadband download speeds of at least 10 Mbps by 2021, following the launch of FSB’s ‘Lost Connection’ report last week
  • Protecting co-investment in apprenticeships amid a drying-up of apprenticeship levy funds and concerns that the system will run out of funding entirely by 2022
  • Delivering the 2017 Conservative Manifesto commitment to a national insurance holiday for small employers who take on those furthest from the labour market

Mike Cherry added: “While the helicopter view of our employment market shows it has held-up relatively well over the past few years – as firms increased headcounts rather than invested for the long-term – small employers are now under significant costs pressures, with little help from government when it comes to tackling low pay.

“The £16 billion annual cost of the Government’s commitment to increase the National Living Wage by close to 30% over just five years will be met entirely by employers. Eligible employees will receive a £4,000 pay increase, £1,800 of which will be handed to the Treasury. There needs to be some give and take here: increasing the Employment Allowance will focus support on the small businesses least able cope, enabling them to continue to create jobs in our local communities. Employer national insurance contributions effectively serve as a jobs tax, making it harder to grow a business and provide opportunities.    

“This Government’s approach to tackling low pay is now even less supportive than the Opposition’s – heaping obligations on businesses without providing any reliefs or incentives. The annual average cost of running a small business is now £60,000 greater than it was in 2011. That increase is largely due to employment costs, which are consistently flagged as the number one cause of higher outgoings among small businesses.

“Cash is always king for small firms. If we hit a serious bout of Brexit-linked turbulence in the months ahead, the banks and HMRC will need to do all they can to support those impacted by cashflow issues. The damage of Brexit uncertainty has already been done. Small business owners have been left unable to plan, and are finding it increasingly difficult to retain EU clients and staff. Direct financial assistance is now urgently needed for those that have been directly affected by the three-year impasse.

“More widely, we have to bring the UK late payment crisis that destroys 50,000 businesses a year to an end. The swift appointment of a new Small Business Commissioner is a must. We also need to see the Chancellor map out a timetable for delivery of promises made: the creation of audit committees with explicit responsibility for supply chains at big corporations; strengthening of the toothless Prompt Payment Code under the direction of a properly empowered Commissioner; and the total exclusion of late payers from public procurement processes.

“We’ve fought hard for progress, but there’s a lot more work to do to put our endemic poor payment culture to bed for good. This Chancellor should lead the charge and set out his plans for doing so on 6th November.”

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