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Small businesses left hamstrung by political uncertainty

Small firms are pausing recruitment plans, halting investment and scaling-back exports as they’re left hamstrung by political uncertainty, according to the Federation of Small Businesses (FSB)’s comprehensive SBI analysis.

Amid the turmoil, FSB is calling on the UK Government to follow the example set by Ireland and the Netherlands by giving smaller firms vouchers that can be spent on preparing for future trade scenarios.


Over the past three months, only one in ten (11%) small firms have taken on new staff, according to the latest SBI. The figure is at an all-time low. A similar proportion (12%) are actively decreasing headcounts.

Export intentions are also at a record-low, with just a quarter (27%) of smaller businesses that sell overseas expecting to increase exports in Q2. During the same period last year, that figure stood at 42%. Two thirds (66%) of those surveyed say international sales are steady or falling – up three percentage points compared to Q1 2018.

Revenues have tumbled among small firms over the past three months. More than a third (37%) say revenues are down – an all-time high – and a quarter (25%) report a flat-lining. Looking ahead to the coming three months, fewer than four in ten (38%) expect rising revenues, down significantly from this time last year (45%).

The UK-wide SBI confidence measure remains negative in Q1 2019 (-5.0), representing a significant drop compared to a year ago (+6.0). This marks the third consecutive negative reading for the headline index.

Such sustained quarter-on-quarter pessimism is a first for the SBI, which launched in Q1 2010. Seven in ten (70%) small firms do not expect their performance to improve in the coming three months.

FSB National Chairman Mike Cherry said: “Small firms were told that we would be leaving the European Union today with a good understanding beforehand of what the future would hold.

“Instead, we’ve suffered 1,000 days of uncertainty since the Brexit referendum, leaving us unable to plan, invest and grow. Naturally, that’s impacted bottom lines.

"This failure of the UK political system cannot be allowed to happen again. While many politicians have prioritised machinations, the smaller businesses that make-up 99% of our economy have been left in the dark.
 

"Thousands have had to shell-out for scenario planning. The least the Government can do now is follow the example set by Ireland and the Netherlands by providing small firms with vouchers to access the advice, equipment and upskilling they need to future-proof their businesses as trade arrangements change. Making soft loans available to small firms for this purpose is also a useful option.

“Looking ahead to next week, smaller firms will be hit with a triple whammy of Making Tax Digital, business rates hikes and higher auto-enrolment pension contributions. These fresh burdens couldn’t be coming at a worse time.

“We’ve already seen the UK business population drop in 2018. If this Government’s not careful, we could see a further contraction this year.”