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Small business owners left with head in hands as confidence losing streak continues

Following April’s introduction of MTD, an increase in minimum wage rates and higher auto-enrolment contributions for employers, concerns about labour costs and regulation are soaring among small businesses, the FSB has said.

  • Maja Garaca Djurdjevic
  • June 12, 2019
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Seven in 10 small firms do not expect their performance to improve over the coming three months, according to the latest research from the Federation of Small Businesses (FSB).

The UK SBI confidence measure stood at minus 8.8 in Q2 2019, down 22 points compared with the same period in 2018, marking a fourth consecutive negative reading. According to the FSB, such a sustained slump is a first for the index, which launched in 2010. 

FSB's research revealed that a considerable majority (68 per cent) of small firms do not expect their performance to improve next quarter, while four in 10 (41 per cent) expect it to worsen. 

Seven in 10 (71 per cent) small firms said the cost of running their business is increasing, while a record-high 48 per cent said labour costs are a main cause of this increase.

Over a third (34 per cent) of small businesses reported that regulation is a primary cause of higher costs, up 12 percentage points compared with the same period in 2017.

Looking ahead, the FSB reported that a record-low 45 per cent of small business owners expect to grow their firms over the coming 12 months, with a record-high one in three (33 per cent) citing labour costs as a major barrier to growth. The domestic economy remained the most frequently cited expansion constraint, flagged by more than six in 10 (63 per cent) firms.   

"Small business owners are increasingly being left with our heads in our hands as we’re hit on all sides by fresh costs, reporting requirements, political uncertainty, and the re-emerging threat of a cliff-edge no-deal Brexit in just 20 weeks’ time," FSB national chairman Mike Cherry said. 

He noted that with attention switching to the race for Prime Minister, "we need all candidates to set out their plan to back entrepreneurs and address the mounting challenges they face".

“Increasing tax, regulatory and employment burdens are weighing heavy on small businesses, making it harder for us to hire, export and expand,” Mr Cherry explained. 

“Politicians need to up their game. We can’t hope to end this confidence losing streak until they make it easier for small firms to compete.”

FSB surveyed 982 small businesses for the Q2 2019 Small Business Index between 13 May and 27 May 2019.

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