Small firms facing autumn storm as support is cut

  • 30 Sep 2021

Small businesses are facing an autumn storm from September 30, as the furlough scheme ends, the small employer sick pay rebate is scrapped and the Apprenticeship Incentive is closed, the Federation of Small Businesses (FSB) has warned.

At the same time, SME owners are having to deal with rising inflation, staff and supply shortages, energy price spikes, and the prospect of major tax rises and the ending of the suspension of insolvency rules.

In addition, the VAT rate for hospitality and tourism businesses will rise to 12.5% from 5% as of 1 October. 

 

The business support group has called on the Government to increase the Employment Allowance, to replace and reform the New Enterprise Allowance with a rebranded and improved ‘Kickstart Start-Up’ scheme through additional mentors, increased weekly payments, and other support, to keep the Apprenticeship Incentive in place, and to focus this autumn on supporting small businesses to create jobs.

Mike Cherry, National Chair of FSB, said: “It’s potentially a dangerous moment. As the weather turns colder, so too will the operating environment for many firms. With recent economic growth numbers having fallen below expectations, the upcoming festive season may not provide as much of a boost as hoped to many small businesses’ bottom lines.

“We all know that the unprecedented support to businesses and individuals which the Government provided to forestall a full-on economic collapse could not last forever, and that some sort of ‘business as usual’ would need to be resumed. But the Government needs to think carefully about the signals it wants to send to the business community. The memory of how National Insurance and dividend tax rises were pushed through Parliament with no time for proper scrutiny is fresh in every business owner’s mind, and has dealt a significant blow to stores of goodwill.  The prospect of huge jobs tax increases now hitting in April will lead to an extra 50,000 people joining the unemployment line.

“Firms feel assailed on all sides, from energy prices and fuel shortages to longer-term changes to taxes which will disincentivise growth and investment. 

“Small businesses need to feel the Government is on their side; however, recent decisions made have not had their interests at heart. They will be looking to the Conservative Conference and later to the Budget for signs of positive support, rather than closing schemes and hiking taxes. Increasing the Employment Allowance, and rejuvenating the New Enterprise Allowance, would be good places to start.”

 

Meanwhile, FSB has welcomed the Labour Party’s new proposals to ease the business rates burden on smaller firms in England, alongside commitment to simplification of the tax system.

Mr Cherry said: “It’s good to see that the Opposition has adopted our proposal to increase the ceiling for small business rates relief to £25,000, which we submitted to the Government’s fundamental review. The gauntlet has been thrown down by the Opposition, and we hope Government Ministers are listening. This is what a pro-small business tax policy looks like.

“Business rates is a regressive tax that hits firms before they’ve made a pound in turnover, let alone profit, whilst disincentivising sustainable investment. This proposal marks a welcome call to action that would take more small businesses out of the regressive rates system and rightly looks ahead to more fundamental reform.”

 

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