“Small businesses want to turn the page after a torrid 18 months”, the UK’s largest business group has told the Chancellor in its Autumn Budget submission, but they are being held back by rising costs, supply chain disruption, and forthcoming tax hikes says Phil Collier, Federation of Small Businesses area leader for Lancashire & Cumbria.
Writing to the Treasury to introduce wide-ranging recommendations, the Federation of Small Businesses is warning that, though economies are unlocking, “a recovery is far from secured – and a strong recovery even less so.”
The group states that the Conservative Party’s relationship with business is at risk after it announced hikes to National Insurance contributions (NICs), dubbed the “jobs tax”, increased taxes on the self-employed, and dividend taxation as inflationary pressure took hold following a post-lockdown opening-up of economies. Together this marks the biggest permanent small business tax hike in modern British history.
FSB is urging the Government to focus on mitigating the impacts of rising costs and driving value in public sector spending, particularly with regards to procurement.
Its new study, published last week, shows that close to a third (31%) of small firms would be forced to raise prices if the NLW increased to £9.42 in April, with a similar proportion (27%) of owners saying they would absorb the increase themselves, recruit less (15%) or reduce hours (15%).
Separate, fresh FSB analysis shows that only one in five (20%) small businesses have bid for public contracts in the last three years, with many deterred by levels of bureaucracy and minimum contract values.
In its costed Budget submission – which sets out close to £2 of savings for every £1 of additional spending proposed – FSB is calling on the Government to:
- Increase the Employment Allowance to save small businesses £5,000 rather £4,000 on their annual jobs tax bills. This could help protect jobs in the smallest employers – those with four or fewer employees – who will otherwise be hardest hit by the end of furlough and the increased jobs tax (estimated cost: £455 million).
- Expand Small Business Rates Relief (SBRR) to premises with a Rateable Value of £25,000, thereby removing an additional 200,000 small firms that are disproportionately based in levelling-up target regions such as the North West, North East, Yorkshire, and South West of England from the system (estimated cost: £1.1 billion).
- Save on cross-government procurement spend by 3% by breaking up contracts and bringing a greater diversity of smaller businesses into supply chains, meaning improved productivity and resilience, whilst reducing regulatory requirements by a third, in accordance with the British Columbia model (estimated saving: £8.5 billion).
The formal submission contains over 60 recommendations, and together represents a new playbook for how to return the UK economy to growth and prosperity. Further measures put forward include maintaining commitments to the UK Shared Prosperity Fund, and encouraging start-ups through expanding Start-Up Loans and a refreshed and reformed Kickstart Start-up scheme to replace the New Enterprise Allowance – a programme reportedly under threat, despite seeing greater success in helping people to join workplaces than the Work Programme.
