This post was originally published on this site.
Only around one in six small businesses expect to grow over the next 12 months.
The economy, tax, and labour costs are the main barriers to growth for small firms, according to the Federation of Small Businesses (FSB) survey of 1,113 small business owners and sole traders in June.
The 18% of small firms that expect to grow is the lowest ever proportion in the history of the FSB’s Small Business Index, which dates back to 2014. Around one in three small businesses expect to shrink, sell up, or close entirely over the next year.
Three fifths of small businesses pointed to the domestic economy, 40% to the tax burden, and 33% to labour costs as the leading factors they believed would put a brake on their growth.
Revenue performance among small businesses was subdued in the second quarter, with only 22% reporting an increase in takings over the past three months. Over half of small firms experienced a fall in revenue.
For the coming quarter, 23% predicted that sales will rise, while 48% believed they will decrease, down from the first quarter’s figures of 25% and 45%.
Cost pressures increased in the second quarter, with the proportion of small businesses reporting higher running costs when compared with the same period last year rising from 87% in Q1 to 89% in Q2. Three in 10 businesses said that their costs had risen by more than 10%, up from over a quarter (26%) in Q1.
Taxation was the most-cited driver of cost increases, at 58%, followed by fuel at 55%, utilities at 54%, and labour at 53%
Tina McKenzie, FSB’s policy chair, said:
“With a new government imminent, we need to see new drive, ambition and focus to get the ‘growth, growth, growth’ promised at the election.
“We cannot and must not accept a ‘new normal’ where more small firms believe they will shrink, sell up, or close entirely than anticipate growing over the next year. Small firms are the only engine of growth present in each and every postcode and we need them firing on all cylinders.
“The unforced errors on business rates made at the last Budget clearly need to be revisited and reworked – and we strongly welcome Andy Burnham’s promising comments in this regard.
“The new prime minister’s first Budget will be a huge early test of whether he can put small businesses first, drive down costs, and drive up growth, opportunity and jobs – but what is crucial is that this is complemented by every department finally putting growth first and pulling in the same direction.
“Part of that is delivering on important manifesto commitments – especially on late payments – where progress has been present but pedestrian. The new Commercial Payments Bill must be prioritised and given a day-one commitment to bring these vital measures into force as soon as possible.
“But equally, this will be about recognising that those running small businesses are people too, and suffer just as much as everyone else when a ‘Whitehall knows best’ culture fails to listen to the people delivering growth on the ground.
“Small businesses are by their very nature optimists. We can all hope that a new government with refreshed ministers will start to turn things around.”
