Things aren't getting better, say small businesses
10th June 2019
More than two thirds of small businesses believe performance will not improve in the next quarter, according to the Small Business Index, a survey carried out by the Federation of Small Businesses.
The SBI reported that 68 per cent of the 982 businesses surveyed between May 13 and May 27 believed that performance would not improve in quarter three of 2019.
The survey showed that 41 per cent believed performance would worsen as concerns about the impact of a series of changes made in April came into force.
The introduction of Making Tax Digital, an increase in the minimum wage and higher auto-enrolment contributions for employers has led to growing concerns over labour costs and regulation.
The survey showed 71 per cent of businesses say the costs of running their business is increasing and a record high 48 per cent say that labour costs at the reason for the increase.
That has led to a net balance of small business that are increasing headcount - the proportion hiring new staff less the proportion reducing team size - being at a three year low of minus two per cent.
The share of small businesses expecting to grow their firms over the coming 12 months is at a record low of 45 per cent, with 33 per cent citing labour costs as a major barrier to growth.
Four in ten (42 per cent) of small firms say that profits are down in the quarter and more than a third (34 per cent) say international sales have dropped.
FSB National Chairman Mike Cherry said: "Small business owners are increasingly being left with our heads in our hands.
"We're hit on all sides by fresh costs, reporting requirements, political uncertainty, and the re-emerging threat of a cliff-edge no-deal Brexit in just 20 weeks' time.
"With attention switching to the race for Prime Minister, we need all candidates to set out their plan to back entrepreneurs and address the mounting challenges they face.
"Increasing tax, regulatory and employment burdens are weighing heavy on small businesses, making it harder for us to hire, export and expand.
"Politicians need to up their game. We can't hope to end this confidence losing streak until they make it easier for small firms to compete."
The fall in small business confidence is particularly pronounced within certain sectors.
Small manufacturing (+2.0), retail and wholesale (-29.4) and construction (-33.2) firms have suffered 25, 27 and 56 point drops in their SBI readings respectively compared to this time last year.
The manufacturing and construction Purchasing Managers' Indices both fell below 50 last month, indicating a contraction in activity across these industries.
May also saw the biggest drop-off in retail sales on record.
Mike Cherry added: "Some sectors are suffering more than others. Business rates, spiralling labour costs and higher input prices off the back of a weaker pound are making life a misery for our small manufacturers, construction firms and retailers.
"Targeted intervention is desperately needed. Wholesale business rates reform is overdue and more must be done to ensure labour-intensive sectors benefit from the vital Employment Allowance."
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