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09 January 2019

Productivity slumps as uncertainty weighs on small firms

Responding to the announcement that UK productivity growth has dropped to a two-year low, Federation of Small Businesses (FSB) National Chairman Mike Cherry, said:

“Today’s productivity data demonstrate exactly what a prolonged period of uncertainty does to an economy.

“Small business confidence has dropped to its lowest point since the financial crash, with four in ten firms expecting their performance to worsen in the months ahead.

“More than two thirds are not planning to increase capital investment next quarter. Without investment in productivity-enhancing tech, machinery and skills, we’re unlikely to see these figures improve any time soon. But naturally small business owners are holding fire on investing for the future because – less than 80 days from Brexit – they simply don’t know what the future holds.

“Equally, with net migration from the EU plummeting over the past couple of years, and employment levels at record highs, it’s proving harder and harder to bring in the right employees with the skills and drive to boost output per hour.      

“Labour costs are soaring, and will rise again in April when minimum wage rates and employer auto-enrolment contributions increase again. In this context we need to see the Government re-visit initiatives to support the smallest employers, starting with an increase in the now effectively-targeted Employment Allowance.”