FSB is urging the Government to help arrest a continued slump in small business optimism at next week’s Spring Statement. Data from FSB’s latest quarterly Small Business Index (SBI) shows confidence among smaller firms across the UK as a whole 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. However, more positively, confidence among Welsh businesses remains higher than the UK as a whole with the figure rising 11% to 13.9%
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 also hit a four-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 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’s 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.
Ben Francis, FSB Wales Policy Chair stated:
“While it’s reassuring that confidence in Wales remains higher than the UK overall, we know that this confidence is fragile and may well be upset by any significant shocks which might be ahead.
While we look to UK Government to instil some measure of certainty over Brexit, we have an expectation too that Welsh Government will play its part in creating the right landscape for businesses to succeed and address some of the constraints facing those businesses.
We want to see more substantial movement on plans to reform business rates. 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 which is welcome, too many businesses have been left out in the cold and too many businesses cite this as their most significant constraint
Given the challenges of the weeks ahead, Welsh and UK governments will need to do all they can to reinforce business confidence by demonstrably and productively co-operating to ensure that any negative short-term impacts are mitigated”.