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Gloucestershire Business News

Small business confidence falls

Small business confidence has fallen amid fears over inflation and tax rises, a new study finds, as the Chancellor is urged to act.

The Federation of Small Businesses (FSB) 'Small Business Index' shows concern about the tax burden ahead of Wednesday's Budget, with firms planning to recruit fewer people and cut back investment

A rising number of businesses now cite fuel and utility costs as a major barrier to growth.

The share of small businesses who feel they are held back by labour shortages is also at a five-year high.

Mike Cherry, FSB National Chairman, said: "On every front - from inputs, to energy, to recruitment, to shipping, to tax - small businesses are up against it."

The survey shows small business confidence is falling away after the announcement of plans to increase national insurance contributions (NICs) rates.

Close to two thirds (62%) of the nearly 1,400 small firms surveyed for the study do not expect their business performance to improve over the coming three months.

Treasury plans to increase Class IV and Employer NICs, as well as dividend taxation by 1.25 percentage points will cause firms to put the brakes on hiring and discourage investment, the research finds.

A third of employers (33%) say that they would be forced to increase prices due to the changes. They will also cut their own compensation (24%), recruit less (17%) and scale back investment (16%).

Four in ten (41%) sole traders say they will have to increase prices, with some (6%) saying they'll shut down their business permanently if the NICs hike goes ahead unchecked. More than one ten (11%) say they will "reconsider being self-employed".

Mike Cherry said: "Small businesses right across the UK are hoping this Budget reflects the Government's aspiration to create a low-tax, high-productivity economy.

"As things stand, its planned hike to NICs - which serve as a job tax - will see firms with even less room to manoeuvre when it comes to investment, recruitment and reskilling, whilst leaving many with no choice but to raise prices. The risk of stagflation is very real, but there is still time to act.

"Increasing the Employment Allowance from £4,000 to £5,000 could make a real difference to the prospects of small employers as we head into an uncertain winter."

The FSB says it would like to see VAT on utility bills reduced for the smallest businesses.

He added: "With small business confidence dropping just at the point when they should be bullish about recovery, this Budget is the Chancellor's opportunity to deliver."

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