Confidence amongst small firms in the Capital has dropped. New data from FSB London’s Small Business Index (SBI), released today, showed confidence levels have fallen to -5% in Q4 2021, from +38% in the previous quarter.
Approaching one in ten (8%) say late payment is now threatening the viability of their business. Latest government statistics show that there are an estimated 5.5 million small business in the UK – a figure which fell by 400,000 over last year’s lockdowns. The new FSB study suggests that over 80,000 small firms in the Capital could be forced to close again this year due to late payment alone.
Other Key stats from the report are:
- The number of small businesses in London hiring last quarter (21%) has begun to overtake the number decreasing their staff numbers (15%).
- 74% of small firms expect to see salary increases over the next 12 months.
- Investment intentions going into the next quarter are strong and well ahead of the UK average, with London expecting to receive the highest net investment out of all regions.
- In London, 41% of small-businesses expect to increase investment in their business over the next 3 months, with a smaller proportion (11%) expecting to decrease it.
- The overall difference in gross profit from the last 3 months is positive (net score, 4%) with businesses in the region performing above the UK average (-5%).
- Furthermore, London is the most positive region for predicted net gross profit over the next three months in the whole of the UK.
In London, the general economic conditions in the UK (64%), consumer demand (36%) and appropriately skilled staff (30%) are the greatest perceived barriers to growth over the coming twelve months. There are significant opportunities for small businesses in the capital to create jobs but we must ensure that we protect small firms from cost pressures, tax hikes and supply chain issues.
FSB London’s 5 key recommendations are:
- Every big business/government organisation should be abiding by the prompt payment code as over 80,000 London businesses could be forced to close this year due to late payment
- Increase the small business rates relief ceiling to £25,000, which would take 200,000 more firms out of this regressive tax
- An increase in the Employment Allowance from £4k to £5k to mitigate the National Insurance Increase from April
- The Government should learn lessons from the botched roll-out of the SME Brexit Support Fund and launch a new fund. This should have similar aims but a more sensible eligibility criteria, reasonable application deadlines and a genuinely international focus
- An urgent London-level tourism marketing fund to welcome back visitors to help boost the recovery in the centre of London as we move into Spring.
Rowena Howie, FSB London Policy Chair, said: “Confidence in the capital is extremely fragile and our Small Business Index shows that there is pent up ambition and this needs to materialise. The ambition to invest in the business, to create jobs and to carry out business abroad are key to recovery.
"However, paradoxically, there remains uncertainty and many businesses in hospitality, retail and leisure are still reeling from a ‘Golden Quarter’ that did not happen due to the Omicron variant. Small firms in the capital wait to hear what the guidance on Plan B will look like on January 26th.
“We need clear and consistent messaging and support from Government giving many small businesses confidence to plan. The National Insurance ‘Jobs Tax’ in April will disincentivise many small firms from growing – and so an increase in the Employment Allowance would provide some welcome support but we also need to see action taken to get small businesses paid on time. A late payment not only damages the credit worthiness of a business, it affects the ability to pay suppliers and staff and is quite frankly a pitiful way to treat small businesses, and, put simply, this practice must stop.”