Just one in six British small businesses expect to grow in the next 12 months, the lowest rate since records began in 2014, while almost one in three expect to downsize, sell or close their doors permanently.
The findings, from the Federation of Small Businesses’ quarterly Small Business Index, highlight the extent of the challenge facing Andy Burnham as he prepares to enter Downing Street on Monday. A tourism group has warned the incoming prime minister that he will face a “big test” to reform the economy.
The gap between firms forecasting growth and those forecasting declines, sales or closures is now the widest the FSB has ever recorded. The remaining balance started positive last year and has remained below zero since then.
For owners who follow the numbers, the perpetrators are familiar. The survey of 1,113 small business owners and sole traders, carried out in June, found the state of the UK economy, taxes and labor costs were expected to act as a major drag on growth next year.
Tina McKenzie, FSB policy chair, said: “We cannot and must not accept a ‘new normal’ where many small firms believe they will downsize, sell, or close altogether rather than expect to grow over the next year. Small firms are the only engine of growth that exists in every postcode and we need them firing on all cylinders.”
Time gives Burnham something on the tray. McKenzie said he hoped to deliver on his promise to extend small business relief, which is an issue for the 104,000 small companies that went bankrupt when April’s review hit a ten-year mark.
“The first budget of the new prime minister will be a big test early on if he can put small businesses first, reduce costs, and increase growth, opportunities and jobs, but the important thing is that this is completed by the whole department to finally put growth first and pull in the same direction,” he said.
The image of trading after dark is bright. Only one in five small companies reported higher hiring in the second quarter, far outnumbered by more than half that saw revenue decline.
Costs, meanwhile, keep rising. Nearly nine out of ten respondents reported higher operating costs than last year, up slightly in the first quarter, with taxes being the most cited reason for the increase.
McKenzie also urged ministers not to allow late payments to be waived now before parliament drops the scheme, saying the law, which has been billed by the government as cracking down on late payments for more than 25 years, “must be prioritized”.
He said he hoped the Burnham government would recognize that small businesses “suffer just like everyone else when the ‘Whitehall knows best’ culture fails to listen to the people who bring growth down”.
For SME owners, the message to the new administration is simple enough: a sector that employs millions in every postcode in Britain is running out of steam, and the first budget will show whether anyone in Whitehall is listening.
