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03 November 2016

FSB calls for Chancellor's first autumn statement to boost confidence, investment and long term growth

  • Infrastructure spend to address historic underinvestment in local roads and deliver smaller scale projects
     
  • Clarity on value for money domestic assessments for EU-funded projects supporting small business growth, until UK leaves the EU
     
  • Tax burden to be minimised - delay mandatory quarterly tax reporting, realign the business tax system to incentivise growth, employment and investment and include specific help for the self-employed

In its submission to the Chancellor of the Exchequer in advance of the 2016 Autumn Statement [1], the Federation of Small Businesses (FSB) has called on the Government to deliver a set of policy initiatives that will boost confidence in the domestic economy, keep businesses of all sizes investing and show clear commitment to supporting long term growth and prosperity across all of the UK.

FSB’s recent quarterly survey shows small business confidence is in negative territory for the first time in four years [2]. This drop in confidence has been a trend since the start of 2016, due to fundamentals in the domestic economy exacerbated by uncertainty since the referendum result. Small firms are facing a growing number of domestic challenges including a weakening domestic economy, rising labour costs, pensions auto-enrolment, and increasing tax administration - together with a business rates revaluation and the prospect of mandatory quarterly tax reporting. The Autumn Statement is the moment for the new Chancellor to set out his priorities to back small business.

Mike Cherry, National Chairman at the Federation of Small Businesses, said:

“Smaller businesses are coping with huge challenges and an uncertain economic outlook. For us to create growth and jobs, and drive productivity, we want to see the Chancellor deliver an Autumn Statement that provides much-needed support for small businesses. Over half of our members say they are looking to grow in the next 12 months. To realise these ambitions, small firms need a business environment that allows them to operate efficiently and effectively. The new Government has a major role to play.

“Improvements to our national infrastructure are critical if the UK is to remain competitive in the global economy. Delivery of major infrastructure projects such as Hinkley Point and Heathrow are of course important, but it is also clear that small businesses across the UK have long suffered from underinvestment in their local road network. Focussed spending in this area, together with the delivery of smaller scale improvement and maintenance projects and a push for majority-UK small business supply chains and procurement, will boost connectivity and growth.”

Since the UK voted to leave the EU in June, there has been a great deal of uncertainty around the future of funding for EU projects, including key projects for small business support. The Government has indicated that all funding applications not already signed by the point of Autumn Statement and approved before we leave the EU will be honoured, but that these will be judged against two additional criteria. The Chancellor should now provide clarity on the design and application of these tests and ensure they don’t stifle private sector match funding and investment.

Mike Cherry continued:

“We know there has already been a slowdown in applications for EU funding, impacting on longer term projects. Small firms want to plan for the future and many currently rely on EU-funded local infrastructure, business support and access to finance projects.

“This is an opportunity for Government to undertake a full root-and-branch review of the current funding streams to consider what’s working well and what could work better. This will help prepare the way for when we finally exit the EU – with the aim of providing better targeted schemes that address the needs of UK small businesses. The Autumn Statement should set out the Chancellor's approach in this area."

Our members are seeking reassurance that the Chancellor will now reaffirm the Government's commitment to permanently increase Small Business Rate Relief (SBBR), and that no additional tax burdens will be introduced. Small firms are already facing rising business costs, labour costs, dividend taxation, and pensions auto-enrolment. So we believe targeted and value for money increases in employment and investment allowances would boost economic growth, jobs and pay.

We would also ask the Government to address the anomaly whereby any business eligible for rural rates relief cannot claim SBBR. When the new scheme is put in place next April, it should level the playing field and allow rural and urban businesses to benefit from new SBBR thresholds.

Mike Cherry concluded:

"FSB is particularly concerned about the impact of new rates increases on small businesses in London, with revaluations leading in some cases to a 100% increase in bills, threatening jobs and in some cases forcing relocation. Rateable values are too high to allow small firms to benefit from SBBR. We would like to see an increase in London thresholds, and a new inner/outer London zone to match rental growth and address the specific problems faced by small businesses in the capital.

“Small businesses contribute heavily to the growth of the UK economy. The rapid and sustained growth in the self-employed has not been matched by the modernisation of the tax and regulatory system, and so we will take part in the Prime Minister's Taylor Review which recognises this trend. We believe the self-employed deserve greater parity with the employed, together with a new statutory definition of self-employment. Overall, we need an Autumn Statement that recognises and encourages enterprise and provides an economic environment where smaller businesses can thrive.”

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