Business groups urge government to rethink NICs

The latest research on quarter 3 from the FSB shows employment warning signs among small firms, ahead of planned tax and employment cost rises, exports tumbling, and many businesses not fully prepared for imposition of import checks.

On top of this, finance applications hit six-year low.

FSB is urging the Treasury to look at what its plans to increase employer, employee and sole trader NICs, as well as dividend taxation, by 1.25 percentage points in a few months’ time will mean for jobs in businesses​.

The call comes as the latest full SBI report, published on Monday (15 November), shows one in seven (14 per cent) smaller firms are reducing headcounts in Q3 2021, despite furlough still being in place, up two percentage points (pp) compared to the same period in 2019, before COVID hit.  

Among the nearly 1,400 survey respondents, the vast majority (82 per cent) are not planning to increase staff numbers this quarter. The figure is up 3 pp on Q2 of this year when economies were starting to unlock. 

With a new EU-UK trade agreement now in effect, supply chain disruption ongoing and shipping fees rising, four in 10 (41 per cent) exporters report a drop-off in international sales last quarter, up 10 pp on the same period in 2019. 

Only one in five (21 per cent) are fully prepared for the introduction of import checks next year. The same proportion (21 per cent) have temporarily or permanently stopped exporting to the EU – a further 7 per cent are considering doing so.

Elsewhere, the volume of small-business finance applications has hit a six-year low – just one in 10 (10 per cent) have sought new facilities over the past three months. The share having applications approved (52 per cent) has dropped 18 pp from Q3 2019. More than half (57 per cent) were offered borrowing rates of 5 per cent or more.  

The UK SBI reading stands at +16.4 in Q3 2021, down more than two points on last quarter (+18.6) and almost nine points on Q1 (+27.3).  

“Small business confidence surged at the start of this year but – following the announcement of a jobs tax hike – that resurgence has run out of steam,” FSB national chairman Mike Cherry said.  

“What we’re left wondering is: where is the Government’s assessment of what April’s tax increases could mean for unemployment?

“The tax rises will be hitting at the same time as a rise in the living wage, and against a backdrop of surging inflation and supply chain disruption, so we need to know how the Government is analysing potential repercussions.  

“We put together our own estimate and found that the jobs tax increase could cause 50,000 more people to become unemployed. All we’re asking is for the Treasury to publish its own forecast.

“With employment intentions subdued among small firms – which were the most reliant on the furlough scheme – we urgently need to see the Government increase the Employment Allowance to help community businesses recruit, retain and reskill over the coming months.   

“Equally, too many small exporters – often our most innovative and profitable firms – are struggling to get across new paperwork and preparations for import checks.

“As such, policymakers should revamp and relaunch the SME Brexit Support Fund, widening the eligibility criteria, and making deadlines for applications more realistic.”