FSB has made the case for a fresh iteration of business support measures as its new survey of 1,500 small firms shows confidence has been in negative territory since July 2018.
The recommendations come amid signs that the UK’s nascent economic recovery is stalling and ahead of an incredibly difficult trading period in the run-up to Christmas and the end of the transition period.
The UK’s largest business group welcomed the Chancellor’s enhancement of existing schemes last week and is now calling for fresh interventions to help those that have received no income support to date, reduce the costs of hiring, further alleviate the business rates burden and provide more resources for those looking to start-up for the first time.
The Q3 UK SBI confidence figure stands at -32.6, down 28 points on last quarter. Only a third (34%) of those surveyed at the end of last month expect their performance to improve over the coming three months. The significant majority (66%) expect performance to worsen.
A record one in four (25%) small firms say they have reduced headcounts last quarter. An even higher proportion (29%) expect to make redundancies over the coming three months – one in ten (12%) expect to let at least a quarter of their staff go.
Covid-linked disruption has caused revenue growth to fall to its lowest recorded ebb, with more than half (56%) of those surveyed reporting a drop. A similar share (50%) expect revenues to fall next quarter.
FSB National Chairman Mike Cherry said: “Short memories are common in a crisis but we must not forget that small firms were already under the cosh thanks to political uncertainty, rising costs and creaking infrastructure well before the Spring. The Chancellor made some very welcome adjustments to support measures last week, and it’s critical that the new Job Support Scheme is straightforward to use, the self-employed can access the help they require, and local authority cash grants reach as many of those in need as possible, as swiftly as possible.
“However, too many are still without the help they need to weather current disruption – not least company directors, the newly self-employed, those without premises and those further down supply chains in the retail, leisure and hospitality sectors. An ambitious rescue package for these groups is urgently needed. Local authorities should use the new discretionary funds being allocated this week to assist them wherever possible.
“With the unemployment rate rising, we’ll need to encourage more of those who are out of work to strike out on their own over the months ahead. A Kickstart Start-Up programme, inspired by the Kickstart employment initiative and building on the success of the Start-Up Loans and the New Enterprise Allowance programmes, could mark a way forward.
“Equally if we want small business owners to create jobs, we have to bring down the costs of employment, starting with Employer National Insurance Contributions. If we want them to invest, innovate and expand, we have to alleviate the strain of wider government-imposed overheads, including those stemming from an outdated business rates system which continues to stifle too many community businesses all over the country.
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“Now that support measures are continuing through to the Spring, we should also avoid a scenario where businesses suddenly go from going from paying 0% to 100% of their business rates bills in April. And help should be expanded to firms in industries that have not benefited as much as those in retail, leisure and hospitality.”
With this weekend held as the final deadline for a breakthrough in UK-EU trade talks, more than half (53%) of exporters surveyed for the Q3 SBI report that international sales are falling. The figure is up 21 percentage points on Q3 2019. Four in ten (43%) expect a drop in exports over the coming three months.
Mike Cherry added: “More than four years on from the EU referendum, small firms need clarity around what the end of the transition period will mean now more than ever. Negotiators on both sides must pull out all the stops to secure a deal, one that includes a substantial small business chapter outlining how the new agreement will help the firms that make-up 99% of the UK business community.
“As things stand, small firms are being told to shell out for both safety measures and preparations for our new relationship with the EU. Many would like to do more but have run out of cash after a torrid six months. If the Government wants small business owners to step-up preparations, it needs to make doing so financially viable. The introduction of transition vouchers – grants worth up to £3,000 for small firms that trade internationally to spend on preparations for 1 January – would go a long way to aiding efforts.
“In addition, now the Autumn Budget has been cancelled, the Treasury should use this opportunity to rethink proposals to abolish tax-free shopping for international visitors. If implemented, they would make the UK the only country in the EU and OECD to spurn high-spending visitors, reducing revenues for businesses and the exchequer. Instead, policymakers should install a new online system for processing these tax-free purchases in order to provide working capital and shore-up balance sheets at a critical juncture for the economy.”