The Federation of Small Businesses (FSB) has urged the government to re-focus on encouraging and supporting UK small businesses, rather than spending time on ‘political infighting’, in its New Year message.
Mike Cherry, FSB National Chairman, said: ‘Small business owners tend to be an optimistic bunch. They are used to being nimble, adapting to circumstances and making the most of opportunities. They are creative and entrepreneurial.
‘And yet as we head into 2019 small business confidence is on the floor, and desperately needs lifting’.
Highlighting the impact of the recent political turmoil surrounding Brexit, Mr Cherry called on the government to provide clear advice for businesses on how to comply with any new requirements. He stated: ‘Adapting to whatever the new trading circumstances with the EU are will mean changing business procedures, taking valuable time out from running a business, and for many it will involve paying for external expertise’.
The FSB’s New Year message also drew attention to other key issues affecting small businesses, including forthcoming legislative changes such as Making Tax Digital for VAT, the pressure on UK High Streets, and the issue of poor payment practices.
Five of the leading business groups in the UK have warned MPs that the UK is ‘not where it should be’ in regard to its Brexit plans.
The government recently confirmed that it has decided to prioritise preparing for a ‘no deal’ Brexit, and intends to advise UK businesses to begin implementing their contingency plans.
In a joint letter, the Confederation of British Industry (CBI), the Institute of Directors (IoD), the Federation of Small Businesses (FSB), the British Chambers of Commerce (BCC) and manufacturers’ organisation the EEF stated that UK firms have been ‘watching in horror’ as politicians have focused on ‘factional disputes’ rather than the practical steps that need to be taken to secure an advantageous Brexit deal.
The letter also said that firms are ‘pausing or diverting investment’ in order to prepare for a potential no deal Brexit scenario.
The business groups believe that there is ‘not enough time’ to prevent the ‘severe dislocation and disruption’ that will come hand-in-hand with a no deal Brexit scenario. They have called for MPs to ‘talk to their local business communities’ over the festive break in order to help ‘find a way forward’ when they return to Parliament.
The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that a decision to reject Prime Minister Theresa May’s Brexit deal will ‘undermine the chance of stronger economic growth’ in 2019.
In its latest economic forecast, the ICAEW predicted that the UK economy will grow by 1.6% over the coming year. It believes falling inflation, increasing domestic spending power, fiscal loosening and additional business investment in response to a Brexit deal will help to ensure the UK economy grows in 2019. However, a so-called ‘hard Brexit’ could ‘put the brakes on modest growth’, according to the Institute.
Furthermore, the ICAEW suggested that business investment will fall by 0.4% over 2018 as a whole. However, this figure could change during 2019: the ICAEW predicts that business investment will increase by 0.5% next year.
Michael Izza, Chief Executive of the ICAEW, said: ‘The need for greater stability cannot be overstated. Businesses have been unable to plan ahead, and that is a difficult environment for investment.
‘It is crucial that we avoid a disorderly exit and the activation of costly and disruptive contingency measures.
‘The potential adverse impacts on business and the wider economy could be severe, and are not helped by the decision to delay the vote on the withdrawal agreement.’
Business groups have responded to the postponing of the vote on the draft Brexit deal.
Prime Minister Theresa May intends to meet EU officials and European leaders in order to ‘discuss with them the clear concerns’ MPs have in regard to the deal.
The Confederation of British Industry (CBI) said that the delay is ‘yet another blow’ for businesses seeking clarity. Carolyn Fairbairn, Director General of the CBI, said: ‘Investment plans have been paused for two and a half years. Unless a deal is agreed quickly, the country risks sliding towards a national crisis.’
Meanwhile, the British Chambers of Commerce (BCC) stated that business is ‘intensely frustrated’ by the delay. Dr Adam Marshall, its Director General, commented: ‘Businesses are clear that time is rapidly running out. With just over 100 days to go until 29 March, many are already enacting contingency plans in the absence of clarity from Westminster.
‘Businesses need clarity and precision on the UK’s future relationship with the EU and with other key trading partners. Businesses are clear that they do not want a messy and disorderly exit, which both government and far too many firms are under prepared for.’
The Institute of Directors (IoD) called for the government to be ‘clearer’ on its contingency plans. Stephen Martin, Director General of the IoD, said: ‘Many companies are still in the dark about what HMRC and border agencies would require the day after Brexit if there is no transition period. Partly because of a lack of information, only 14% of IoD members say they are fully prepared to manage no deal, highlighting the scale of the challenge if a withdrawal agreement isn’t ratified.’
HMRC has written to 145,000 UK businesses to urge them to begin preparing now for a potential ‘no deal’ Brexit scenario.
The letters, which have been sent to VAT-registered businesses which trade only with the EU, explain changes to customs, excise and VAT in the ‘unlikely event’ that the UK leaves the EU without a deal.
The letters urge affected firms to take three actions now:
- Register for a UK Economic Operator Registration and Identification (EORI) number.
- Decide whether a customs agent will be used to make import and/or export declarations, or whether declarations will be made by the business via software.
- Contact the organisation responsible for moving goods (for example, a haulage firm) in order to ascertain whether the business will need to supply additional information to complete safety and security declarations, or whether it will need to submit these declarations itself.
HMRC intends to write to businesses in the future in order to instruct them on any additional actions they will need to take, and when.
Further information on the issue can be found here. Businesses can keep up-to-date with the latest Brexit advice by registering for HMRC’s EU Exit Update Service here.
A survey carried out by data provider Dun & Bradstreet has suggested that small firms’ plans for growth are being adversely affected by late payments and restricted access to finance.
Overdue payments ‘remain a prevalent challenge’ for many businesses, the survey revealed. The average amount owed to small and medium-sized enterprises (SMEs) currently totals £80,000 – a significant increase from last year’s figure of £64,000.
The survey also outlined other factors that have hindered SMEs’ ability to grow, including restricted access to appropriate finance; managing General Data Protection Regulation (GDPR) compliance; adopting new technology; and sourcing the right talent for their business.
The uncertainty surrounding Brexit has also negatively affected firms: 40% reported that Brexit has ‘significantly slowed’ their growth. An additional 64% of survey respondents stated that Brexit will be the deciding factor in determining the success of their business.
Commenting on the findings, Tim Vine, Head of European Trade Credit at Dun & Bradstreet, said: ‘There’s no doubt the months ahead will continue to be challenging as we move towards the Brexit deadline. Small business leaders are having to contend with scenario planning on top of dealing with day-to-day priorities such as cashflow management, late payments and securing finance for future growth.’
A study carried out by economic think tank the National Institute for Economic and Social Research (NIESR) has suggested that the government’s Brexit deal will cost the UK £100 billion per year by 2030.
The study also indicated that Gross Domestic Product (GDP) will be 3.9% lower by 2030.
The NIESR predicts that, by the end of 2030, total trade between the UK and the EU will fall by 46%; the decline in GDP will cost each UK citizen £1,090; foreign direct investment will fall by 21%; and tax revenue will fall by between 1.5% and 2%.
Commenting on the study, Garry Young, Director of Macromodelling and Forecasting at the NIESR, said: ‘Leaving the EU will make it more costly for the UK to trade with a large market on our doorstep, and inevitably will have economic costs.’
Meanwhile, a separate study carried out by the London School of Economics, King’s College London and the Institute for Fiscal Studies (IFS) has suggested that the deal could leave the UK economy ‘as much as 5.5% smaller’ in a decade’s time.
Responding to the studies, a government spokesperson stated: ‘This deal will protect jobs and our economy, while respecting the result of the referendum.
‘It delivers an economic partnership with the EU closer than any other country enjoys, is good for business and is in our national interest.’