FSB: Leadership hopefuls must show pro-enterprise credentials

FSB: Leadership hopefuls must show pro-enterprise credentials

As the quarterly confidence index falls to level not seen outside pandemic-induced restrictions, the Federation of Small Businesses (FSB) has urged leadership candidates to show pro-enterprise credentials.

Surging operating costs, a high tax burden and struggles to fill vacancies are threatening the futures of hundreds of thousands of small firms and sole traders across the UK, according to the latest SBI findings from FSB.  

The small business confidence measure has tumbled to -24.7, down more than 40 points on the same quarter last year (+18.6).

The figure is the lowest recorded outside of periods when significant trading restrictions aimed at halting the spread of Covid were in place. It stands on a par with that posted in Q3 2020 (-32.6) and is lower than the level seen in the final quarter of last year when the omicron variant was rapidly spreading (-8.5).

Among the more than 1,300 firms surveyed for the study, the vast majority (77%) do not expect their performance to improve over the coming quarter. More than a third (38%) expect it to worsen. Fewer than one in ten (8%) expect to grow rapidly.  

A record high 89% of small firms say operating costs are up this year compared to last, with record high numbers citing fuel (64%), utilities (64%) and inputs (48%) as primary drivers of that increase. Four in ten (43%) flag labour as a main contributor to higher outgoings, with substantial proportions also highlighting taxation (23%) and regulation (15%).    

A third (34%) of firms cite lack of appropriately skilled staff as a barrier to growth, with two thirds (64%) planning to increase wages over the next year as the labour market remains tight. A quarter (27%) plan to increase pay by 6% or more.  

At the same time, investment intentions have hit the lowest point recorded outside of the first lockdown in Q1 2020 – fewer than a quarter (23%) say they’ll up capital investment over the next quarter compared to last.  

Exports are also in the doldrums: the share of firms which do business overseas reporting a decrease in export value (36%) significantly outstrips the number reporting an increase (28%). Those proportions last stood in reverse in Q1 2019.  

Amid myriad challenges, one in seven (15%) respondents say they plan to consolidate, close or sell their firms over the coming year.  

Martin McTague, FSB national chair, said: “The cost of doing business crisis has worsened to the point where confidence is now lower than during last year’s massively disrupted festive trading season.  

“Firms are trying to absorb additional cost pressures but can only do so much before they’re forced to raise prices.

“The small business community reduced in size to the tune of hundreds of thousands over lockdowns. Unless policymakers act fast, history is set to repeat itself.

“Firms desperately need help with the charges that hit them regardless of profitability: business rates, national insurance, utilities, fuel and those linked to supply chain disruption.  

“We’re looking to prime ministerial candidates for unequivocally pro-business, pro-growth commitments. There is still time to act, but time is of the essence.”   

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