FSB is urging the Treasury to look at what its plans to increase employer, employee and sole trader NICs, as well as dividend taxation, by 1.25 percentage points in a few months’ time will mean for jobs in businesses.
The call comes as the latest full SBI report, published today, shows one in seven (14%) smaller firms reducing headcounts in Q3 2021, despite furlough still being in place, up two percentage points (pp) compared to the same period in 2019, before Covid hit.
Among the nearly 1,400 survey respondents that inform the study, the vast majority (82%) are not planning to increase staff numbers this quarter. The figure is up 3pp on Q2 of this year when economies were starting to unlock.
With a new EU-UK trade agreement now in effect, supply chain disruption ongoing and shipping fees rising, four in ten (41%) exporters report a drop-off international in sales last quarter, up 10pp on the same period in 2019.
Only one in five (21%) are fully prepared for the introduction of import checks next year. The same proportion (21%) have temporarily or permanently stopped exporting to the EU – a further 7% are considering doing so.
Elsewhere, the volume of small business finance applications has hit a six-year low – just one in ten (10%) have sought new facilities over the past three months. The share having applications approved (52%) has dropped 18pp from Q3 2019. More than half (57%) were offered borrowing rates of 5% or more.
The UK SBI reading stands at +16.4 in Q3 2021, down more than two points on last quarter (+18.6) and almost nine points on Q1 (+27.3).
FSB National Chairman Mike Cherry said: “Small business confidence surged at the start of this year but – following the announcement of a jobs tax hike – that resurgence has run out of steam.
“What we’re left wondering is: where is the Government’s assessment of what April’s tax increases could mean for unemployment?
“The tax rises will be hitting at the same time as a rise in the living wage, and against a backdrop of surging inflation and supply chain disruption, so we need to know how the Government is analysing potential repercussions.
“We put together our own estimate and found that the jobs tax increase could cause 50,000 more people to become unemployed. All we’re asking is for the Treasury to publish its own forecast.
“With employment intentions subdued among small firms – which were the most reliant on the furlough scheme – we urgently need to see the Government increase the Employment Allowance to help community businesses recruit, retain and reskill over the coming months.
“Equally, too many small exporters – often our most innovative and profitable firms – are struggling to get across new paperwork and preparations for import checks.