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30 September 2011

Government policies to help grow the economy are out of touch with reality, says FSB

Reference number: PR/2011/58

FSB News Release

PR 2011 58

Issue date: Friday 30 September 2011 

Government policies to help grow the economy are out of touch with reality, says FSB

The Government''s policies to kick-start growth and incentivise job creation are too timid and out of touch with the reality of the UK''s sluggish economy, the Federation of Small Businesses (FSB) said today.

Ahead of the Conservative Party Conference, the FSB is warning that while the Government has adopted many policies that will help small firms, few, if any of them, go far enough to tackle the problems they face and belong to a time when unemployment was lower and spending on the high street higher. 

Cutting back on red tape and providing initiatives to help small firms employ have been welcome moves to help small firms grow, but they do not go far enough. The FSB is calling on the Government to be bolder if they are to tackle the challenges faced in this tough economic environment.

Small businesses continue to be stifled by challenges that affected them during the recession and FSB

research has showed that insufficient work and uncertainty over contracts (37%), the state of the economy (33%), cash-flow (31%) and access to finance, as well as the cost of credit (16%) are preventing them from employing. 

With 2.51 million people out of work, and many people having been out of work for more than a year, it is crucial the Government creates policies that will promote Real-Life Entrepreneurs and incentivise small businesses to take on staff and tackle unemployment in the current economic climate.

The FSB is calling on the Government to extend existing schemes to help small businesses take on staff and to adopt targeted measures to boost growth, including:

  • Extending work trials to the first day someone signs on for JobSeekers Allowance to help create an extra 46,000 jobs
  • Extending the National Insurance Contributions holiday to existing businesses with three members of staff that take on up to four
  • Cutting VAT to five per cent in the tourism and construction sectors for one year

The FSB is also calling on the Government to help small businesses employ more apprentices and interns by slashing bureaucracy and re-introducing the Graduate Internship Scheme – 21 per cent of business owners said increased support would encourage them to take on an apprentice. 

John Walker, National Chairman, Federation of Small Businesses, said:

"If unemployment was lower and consumer spending higher, Government policies to grow the economy might work. But they are out of touch with reality. With economic growth sluggish at best, spending on the high street low and unemployment high, the Government needs to ratchet up its growth agenda and send a clear signal to the business community that it will support them.

"Small firms lack confidence about their future prospects but they also hold the key to recovery. Kick-starting demand and further incentivising job creation would give small firms a fighting chance to return to growth. But as it stands, Government policies are merely scratching the surface."