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Gloucestershire Business News

Small business pessimism at greatest level outside of lockdowns

Rising costs and falling revenues are causing the worst small business pessimism outside of lockdowns, new figures reveal.

Cost pressures, falling revenues and a growing reliance on debt to prop up cashflows are among the gloomy findings of the latest Small Business Index (SBI) from the Federation of Small Businesses (FSB).

The quarterly temperature-taking survey reveals a net confidence score of -35.9 in Q3 2022, down 11.2 points compared to the previous quarter.

Almost half (43 per cent) reported falling revenues over the three months to October, compared to less than a third (32 per cent) reporting an increase. Over the coming three months, four in ten (41 per cent) expect revenues to decrease.

Rising costs continued to affect the vast majority of small firms (89 per cent), with nearly two in five (38 per cent) seeing costs increase by more than 10 per cent.

The primary cost factors are utilities (60 per cent of respondents), fuel (57 per cent), inputs (48 per cent), and labour (43 per cent).

More than two thirds (68 per cent) of small business employers have increased wages over the last year, with the average wage increase 4.5 per cent.

FSB national chair, Martin McTague, said: "Small business entrepreneurs are, by their nature, an optimistic, dynamic and innovative bunch, which is why it is all the more stark to see this plunge in confidence. They want to be driving growth and economic recovery, but the headwinds against them right now are gale-force.

"Recent political and economic turmoil hasn't helped, which is why it is vital the Government focuses on stability, including delivering on its promises to help with energy bills for small firms and to reverse the hike in National Insurance. That money must be in the pockets of small firms by next month, no ifs, no buts, followed by clarity on what will happen after the initial six-month period.

"While the new Chancellor has focused in his first days on reassuring markets to bring economic stability, he will need to turn again later to pro-growth measures, including revisiting issues such as IR35 changes and the decision to raise the equivalent of National Insurance for hard-working entrepreneurs who are paid via dividends. Raising taxes now will not generate growth, and we risk seeing high taxes with low or no growth for the foreseeable future.

"Taking more small firms out of business rates, which they're clobbered with before they've earned a penny, would be a positive, pro-growth step. In time, there should also be a review of the level at which the higher rate of Corporation Tax kicks in, reducing a barrier for ambitious smaller companies.

"The Government's own new annual figures show that two years of Covid has left the small business population smaller by half a million small firms and the self-employed. This gap of missing entrepreneurs, alongside those that have left the jobs market, should be the focus of medium-term growth measures, to help small businesses start up, grow, and recruit, after getting through the toughest of winters."

FSB surveyed 1,383 small business owners and sole traders between 20 September and 4 October 2022.

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