A record low number of small businesses are expecting to grow this year and their owners are in despair about Brexit and rising labour costs.
Only 45 per cent of small businesses expect to expand over the next 12 months, according to the Federation of Small Businesses. Its quarterly confidence index measure stood at -8.8 in the second quarter, down 22 points on a year ago. It is the fourth consecutive negative reading.
The index is based on a survey of 982 companies undertaken last month by Verve, a research company. It covered economic indicators including confidence, employment, wages and exports.
A survey of medium-sized company directors by Robert Half, a recruitment business, suggested that a “significant proportion” were not confident that they were well-placed to adapt and modernise to the challenges in the economy. A study by Hitachi Capital suggested that the proportion predicting growth in the next three months had fallen to one in three.
Last week a snapshot of the economy showed a mixed picture for the services sector and weak performances for manufacturing and construction, according to the purchasing managers’ index by IHS Markit.
Mike Cherry, national chairman of the FSB, said that owners of small businesses were “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”.
He said that small manufacturers, construction companies and retailers had been hit especially hard by business rates, higher input prices from the weaker pound and rising labour costs.
He called on candidates in the Conservative Party’s leadership race to set out plans to support entrepreneurs. “Increasing tax, regulatory and employment burdens are weighing heavy on small businesses, making it harder for us to hire, export and expand,” he said. “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.”
Of the companies questioned for the index, 71 per cent said that the cost of running their business was increasing and 48 per cent said that labour costs were the main cause. Thirty-four per cent blamed regulation for higher costs.
The net balance of businesses increasing their workforce was -2 per cent, a three-year low.
Additionally, 42 per cent of companies reported that profits were down in the second quarter and 34 per cent of exporters said that international sales had declined. The federation said that the figures were record highs.
