Small firms hope budget measures will boost business confidence
As members of the Federation of Small Businesses (FSB) gather for their National Conference in Glasgow, a new survey from the first quarter of this year finds small business confidence at the lowest level since 2013. The results underline the importance of positive measures to support small firms announced in the Budget and the need to maintain support in the face of tough economic headwinds.
The significant drop in small business confidence is one of the key findings of the latest FSB Small Business Index (SBI). The fall is most noticeable in London and the East of England, but all regions of the UK have seen declines. Scotland and Northern Ireland are the least confident areas overall, with both now in negative territory.
The FSB suggests the cooling in confidence is partly a result of uncertainty about the strength of the UK and global economy. However, FSB also found a strong indication that a raft of new challenges facing small businesses – included the National Living Wage (NLW), pensions auto-enrolment and plans to introduce mandatory quarterly digital tax reporting – were contributing to the decline in business sentiment.
Sandra Dexter, FSB Vice-Chairman, said: “Small business confidence has clearly faltered, which is why the welcome small business focus in the Budget is so important. We need a renewed push for growth and productivity – with policy makers delivering a sustained package of support for ambitious small firms.
“The Budget included a number of important measures to help smaller businesses, particularly changes to business rates which will see many small businesses taken out of paying rates altogether. Delivering on tax simplification measures will be vital – as will be pressing ahead with new investment in much needed infrastructure. Taken together these measures should help to boost confidence and help small firms to grow and succeed.”
While the findings of the FSB index predate what has been a positive Budget for small firms, they will nevertheless prove a challenging read for policy makers seeking to gain small business support ahead of key 2016 Elections across the UK.
The report has been published on the same day Scotland’s First Minister Nicola Sturgeon; Labour Shadow Chancellor John McDonnell; and Leader of the Scottish Conservatives Ruth Davidson, are all due to address well over 1200 FSB members and other small business owners at the SECC in Glasgow.
Expected to be at the forefront of delegates minds will be the main barriers to growth highlighted in the FSB Small Business Index. The top five concerns remain the strength of the domestic economy, weak consumer demand, a shortage of skilled staff, increases to the cost of labour and the burden and complexity of the tax system.
As well as falling confidence, the FSB report also reveals how small businesses financial performance, productivity and hiring intentions are all falling year on year.
The first fall in the value of exported goods since 2012 is particularly concerning. Much of this shift can be attributed to the fall in growth rates across both emerging and developed economies. The challenging international climate makes it even more important that the Government pulls out all the stops to support British exporters.
Despite the overall negative picture painted by the research, there are also several positive findings. Access to finance has been a key priority for FSB for many years, and with a record percentage of smaller businesses successfully accessing credit in the past quarter, it appears important progress is now being made.
A related success story is the growing alternative finance sector. Nearly one in 10 (9%) of small businesses which applied for credit this quarter applied for peer-to-peer lending or crowdfunding. This is up from 4% in Q3 2015 and 6% in Q4 2015 – more than doubling in under a year. The share of businesses applying for asset-based finance, such as invoice finance, has also increased since Q3 2015.
Sandra Dexter concluded: “The ongoing improvements to small business finance demonstrates how a sustained and focused approach to supporting smaller firms can really pay off. We now want to see a similar focus and long term drive to simplify the tax system, building on positive announcements in the budget and the work of the Office for tax simplification. By doing this, we can boost small business confidence levels and support long term, sustainable growth.”