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.
A new report published by the Business, Energy and Industrial Strategy (BEIS) Committee has highlighted how ‘bad payment practices’ have led to the ‘failure’ of many small and medium-sized enterprises (SMEs).
The government’s Prompt Payment Code, which was created to address poor payment practices, has ‘too often’ been ‘ineffective’, according to the Committee.
A ‘statutory requirement’ for companies to pay within 30 days should be introduced, the Committee stated. It also recommends giving the Small Business Commissioner the power to fine large businesses who pay their suppliers late.
Commenting on the report, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: ‘Eliminating the scourge of late payments would see 50,000 businesses saved each year, [and] add £2.5 billion to GDP, which would be a real boost to UK productivity.
‘The government must respond to this report with tough action on late payments, supporting smaller businesses to further develop their leadership and management capability, and to improve the adoption of basic digital technologies that small businesses need to grow and become more productive.’
The Federation of Small Businesses (FSB) has warned that UK economic growth is being ‘restricted’ by limited access to alternative finance options for small businesses.
Research carried out by the FSB revealed that just 13% of small firms are currently looking to apply for external finance. 68% of these businesses are being offered lending rates above 4%, according to the data.
Of the firms which applied for finance in the third quarter of 2018, 70% chose to utilise a bank loan or overdraft facility, according to the FSB. The business group warned that there is a ‘lack of meaningful competition’ within the small business banking sector, which is becoming a ‘chronic issue’.
‘Despite being a decade on from the crash, we still have this dangerous combination of weak appetite for, and low awareness of, alternative finance options, high borrowing costs and inadequate support for small firms that are turned down by banks,’ said Mike Cherry, National Chairman of the FSB.
‘Having real time access to accounts will make it easier for finance providers and investors to identify the right routes for clients and make decisions swiftly.’
The Federation of Small Businesses (FSB) has urged Chancellor Philip Hammond to use the upcoming Budget to ‘reduce cost burdens for small businesses’.
Within its Budget wishlist, the FSB has proposed the creation of a £1,000 ‘business rates discount’ for small shops, cafes and pubs, in order to help them to continue trading. It has also called for additional support for the self-employed, and has recommended the implementation of a statutory Adoption Allowance.
In addition, the FSB warned against changes to the Dividend Allowance, VAT and Insurance Premium Tax (IPT) amid ‘spiralling’ compliance and employment costs for small firms.
Concerns have also been raised by the business group in regard to the potential extension of IR35 public sector rule changes to the private sector, with the FSB warning that it is ‘impossible to accurately predict the impact’ of this move.
Commenting on the wishlist, Mike Cherry, National Chairman of the FSB, said: ‘Warm words from the government are welcome, but they need to translate into action.
‘With our small retailers trying to keep their heads above water – and the self-employed community left demoralised by the failure to end Class 2 national insurance contributions (NICs) – this is the Chancellor’s opportunity to show he really does back business.’
Business Secretary Greg Clark has suggested that business rates ‘could be changed’ in order to help high street retailers in the UK.
Experts have stated that rising business rates, increasing staff costs and the rise in popularity of online shopping have created a so-called ‘perfect storm’ for UK retailers.
Speaking at the Conservative party conference, Mr Clark said that the Treasury is carrying out a review of business rates, and that he believes that high street retailers ‘make a big contribution to the community, and to villages, towns and cities’.
Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), welcomed Mr Clark’s statements, saying: ‘Competition from online retailers has left many high street firms struggling and confidence among small businesses in our high streets is falling. Without action on business rates, we will continue to see high street retailers forced to close.’
Business rates now rise by the CPI, rather than the RPI. This change was announced in the 2017 Autumn Budget by Chancellor Philip Hammond. In addition, business rates revaluations are set to take place every three years, rather than every five, starting after the next revaluation, currently due in 2021.
The Federation of Small Businesses (FSB) has called on the European Commission (EC) to ‘up its fight’ in order to put an end to the late payments culture.
In a new report, the FSB revealed that 85% of small businesses that operate within European supply chains are paid late.
Despite the introduction of the EC’s Late Payment Directive, which outlines maximum payment terms of 60 days, 22% of businesses reported that they have been subject to payment terms of more than 60 days.
An additional 12% of firms have been asked for a discount in return for prompt payment, the FSB found.
The business group is calling for small firms’ legal protection to be ‘strengthened’ against lengthy payment terms, and for sector-specific ombudsmen to be appointed for industries that ‘are most at risk of late payments’.
‘Poor payment culture is a problem without borders, damaging small businesses in the UK and across Europe,’ said Mike Cherry, National Chairman of the FSB.
‘Even with the UK leaving the EU next March, the reality is that the EU single market will remain the biggest market for British small firms for the foreseeable future. This is why it is vital that a culture of prompt payment flourishes across Europe.’