- Small Business Index (SBI) turns negative for three straight quarters for first time in nine-year history
- Seven in ten firms not expecting performance to improve; operating costs hit four-year high
- Federation of Small Businesses (FSB) writes to Chancellor urging action on late payments, Making Tax Digital and business rates at Spring Statement
FSB is urging the Government to help arrest a continued slump in small business optimism at next week’s Spring Statement. Published today, data from FSB’s latest quarterly SBI shows confidence among smaller firms remains negative in Q1 2019 (-5.0), down from +6.0 in the same period last year.
This marks the third consecutive negative SBI reading. Such sustained quarter-on-quarter pessimism is a first for the index, which launched in Q1 2010. Seven in ten (70%) small firms do not expect their performance to improve in the coming three months.
The vast majority (74%) of small businesses report rising operating costs. The proportion is at its highest since Q4 2014.
Though Brexit uncertainty is weighing heavily on small businesses, they continue to flag the domestic economy as the number one barrier to growth. More than half (58%) say it is stifling ambitions, up from 55% in Q1 2018.
Elsewhere, the proportion of small exporters reporting a decrease in international sales this quarter has hit a two-and-a-half year high (27%). Four in ten (39%) say exports are flat.
With a week to go until the Spring Statement, FSB has written to the Chancellor urging him to deliver on the promise made at last year’s address to tackle the UK’s late payment crisis. The call follows the launch of its #FairPayFairPlay campaign.
FSB is also urging the Government to commit to a one-year ‘safe harbour’ approach to Making Tax Digital-related fines and follow Scotland’s example by delivering business rates relief for childcare providers in England who are currently facing unique pressures.
FSB National Chairman Mike Cherry said: “Today’s findings must serve as a wake-up call for the Treasury ahead of next week’s Spring Statement.
“We small business owners tend to be an optimistic bunch. The persistence of this current wave of pessimism is unheard of. Even in the wake of the crash, when the economy was well and truly on the ropes, we didn’t see negativity take hold like it has now.
“Small firms still have no idea what regulatory framework they’ll be working to in three and a half weeks’ time. Not only does the political stalemate surrounding Brexit make it impossible to plan, it has also distracted from the domestic policy agenda. Next week is the Chancellor’s chance to change this.
“The UK is facing a late payment crisis. We’re clear about the actions needed to bring the situation under control. At his Spring Statement last year, the Chancellor promised to address the scourge of poor payment practice. That starts with large firms assigning non-executive directors responsibility for supply chains, strengthening enforcement action taken against repeat poor payers, and adopting Project Bank Accounts as the norm for major public projects.
“We’re more than a year on from the collapse of Carillion. Now is the time for the Government to crystallise its plan to tackle our late payment crisis once and for all.
“The roll-out of Making Tax Digital comes at a torrid time for small firms. Next month, they’ll not only have HMRC’s new requirements to think about but also rising wages, higher pension contributions and another bout of business rates hikes. That’s on top of dealing with whatever conclusion our politicians reach regarding Brexit, currently scheduled to happen on 29 March.
“Thousands of firms are not prepared for MTD. The Chancellor should commit to a one-year safe harbour approach to MTD-related fines for small businesses. The focus has to be on helping to ensure compliance rather hitting firms with fines when mistakes are made.
“Business rates is an unfair, regressive tax that hits firms before they’ve made their first pound in turnover, let alone profit. While we’ve seen some welcome measures to help those on high streets with their rates bills, too many businesses have been left out in the cold.
“They include the childcare providers that are struggling with high employment costs and skills shortages. The struggle is exacerbated by chronic underfunding of the Government’s commitment to facilitating 30 hours of free childcare for parents.
“The Chancellor should follow the Scottish Government’s example and grant childcare providers in England the full business rates exemption they desperately need.”
About FSB
As experts in business, FSB offers members a wide range of vital business services, including advice, financial expertise, support and a powerful voice in Government. Its aim is to help smaller businesses achieve their ambitions. More information is available at www.fsb.org.uk. You can follow us on twitter @fsb_policy.