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27 December 2016

FSB National Chairman’s New Year Message

FSB National Chairman’s New Year Message

Our prosperity in 2017 will be founded on the success of the UK’s smaller business movement

Mike Cherry, Federation of Small Businesses (FSB) National Chairman’s New Year message:

In the UK, running a small business and being your own boss is one of the most challenging and satisfying things you can choose to do. We now have a record 5.5 million smaller businesses and the self-employed, but the rate of growth has started to slow. Our country’s prosperity in 2017 will be founded on the success of the smaller business movement. In turn, that success rests upon all of us truly creating a new entrepreneurial culture. This means the whole of society - Government and business, customers and employees, public and private sectors – all choosing to support smaller businesses and the self-employed. Politicians need to pursue policies that make it not just easier to set up a business, but also to run it, putting small businesses at the very heart of policymaking. Teachers need to include running a smaller business as a viable option within careers advice. Customers need to decide whether to spend their money with innovative local businesses or distant multinational brands.

As we look to 2017, this will only become more important. Our 5.5 million entrepreneurs are the engine of the UK economy, employing 60 per cent of the private sector workforce. But there are clouds on the horizon that must be addressed.

Our quarterly Small Business Index constantly tracks confidence levels, and provides a regular health-check for the UK economy. Throughout 2016, confidence glided down before dipping into negative territory in the third quarter for the first time since 2012. Smaller businesses have been struggling, and it makes everyone’s words and deeds important as we head into 2017 – where we hope for recovery.

The UK’s decision to the leave the European Union and the resulting change of government in 2016 did create a huge amount of uncertainty, but new Ministers from the Prime Minister down have been listening to our concerns and suggestions, as has the Opposition. Brexit will bring risks and opportunities for our members, and the strategy adopted in the upcoming negotiations must manage down those risks, and accelerate the opportunities it provides. FSB’s research and policy programme will conclude in the coming months to inform that process.

Brexit is now the biggest issue of our time and having the ear of those in power is more important than ever. But as we advocate for our members, we also say, don’t forget the domestic, by which we mean the pressing issues that smaller businesses face on their doorstep, right now. FSB has managed to achieve this at every level of power. Ministers, spokespeople and MPs at UK level have an open door to FSB UK, and the same is true with the administrations in Scotland, Wales, Northern Ireland and London, who all have a dedicated FSB to speak to. Our ability to influence looks only to grow from the signs of local FSB regions and branches speaking to candidates in the upcoming Mayoral elections in May 2017.

Any smaller business owner will tell you that the sheer cost of doing business has steadily risen over the last year, with a range of policy choices hardening at the same time, creating a cumulative effect. The introduction of the National Living Wage steeply increased labour costs, just as the rollout of workplace pension auto-enrolment hit smaller business. 2017 starts with a weaker medium-term economic outlook, and the prospect of inflation in the Spring. This will squeeze smaller firms affected by the rising price of imports, supplies and products, but without the ability to move their HQ or workforce, or hedge their costs. Smaller firms are anchored in their local community and will need to work out how to cope with margins being squeezed even further.

Given the current climate, FSB wants to help smaller businesses in any way we can. In 2017, we want to directly assist those looking to start a new business with a package of benefits specifically designed for pre start-ups. Our aim is to reduce the risks of setting up on your own and increase the proportion of new starts that thrive. As an organisation, we also need to constantly respond to the new challenges that all smaller businesses face. With most now affected in some way by cyber attacks, we are introducing comprehensive protection and advice, an area where small and micro businesses are underserved. This both encourages better preparation and a rapid response to those targeted.   

2017 will see a big push in HMRC’s Making Tax Digital plans, as the Government makes it mandatory for smaller firms to provide a digital tax report on a quarterly basis. I am dead-set against these proposals. At a time when we need businesses to grow, Government should not be putting in place a mandatory new tax regulation that will cost businesses on average £2,770. Smaller firms are the secret to UK success, not a cash cow for the Treasury. FSB is lobbying intensely to persuade Ministers to improve these proposals, which should be voluntary and phased. They should begin by using thresholds to remove more of the smallest businesses from the regime – those who will be least able to cope.

Late and poor payment practice from larger firms remains a huge issue for smaller businesses in every corner of the UK. We now face a poor payments crisis. If this is not tackled, then every year 50,000 businesses will die – leaving £2.5bn of GDP missing – purely due to late payments. Members will be upping the pressure in 2017, where we want to see reforms promised two years ago now toughened up, and delivered. With 30 per cent of payments typically late, and Finance Directors of large firms squeezing smaller firms to improve their own cashflow, we need to see concrete action and results. In addition to the Duty to Report regulations coming in and a Small Business Commissioner being appointed, FSB succeeded in putting supply chain respect at the heart of the Government’s Corporate Governance Green Paper. We now need to see that enacted so that there is a whole-Board ownership of prompt payment practices.

It’s been our responsibility, since FSB was set up in 1974, to shine a light on the challenges that the self-employed face. We are in effect the trade union for the self-employed, and we champion their interests in everything that we do. That’s why it’s so encouraging to see the Government and indeed the Opposition committing to policy reviews for the self-employed. We wish to see a statutory definition for self-employment, as well as parity of benefits such as maternity pay – this is the right way to ensure the growth in self-employment continues.

In short, it’s not just Brexit – there is a lot to do, to make this an economy that truly works for everyone. We are preparing for whatever Brexit may bring, and the economic challenges we now expect. As a grassroots campaigning organisation, we will have a chance to discuss our hopes and together decide how we take our movement forward. This has been my first year as National Chairman. As we look to the coming 12 months, I look forward to ensuring that smaller businesses get the right support to thrive, and the right voice to those in power, to make the most of 2017. Our country’s future depends upon our smaller businesses success.