Government must make ‘concrete actions’ to support small businesses

The government is aware of small businesses needs and must demonstrate its desire to help them amidst the current economic uncertain, according to Martin McTague, national chair of the Federation of Small Businesses (FSB).    

Despite forecasts of a 0.2% contraction, fresh ONS data from August 2023revealed that UK GDP has surpassed pre-pandemic levels. But according to McTague, small businesses have been “up against it for some time”. 

“The Government knows what small firms need – decisive action on late payments, no new regulatory burdens unless absolutely necessary, and a rethink of the business rates system.  

“The small business community will be keen to hear how the government plans to encourage their growth, with the autumn Budget not that far off – the ball is firmly in the Government’s court.”  

Speaking on the BBC Laura Kuenssberg programme on 3rd September , Chancellor Jeremy Hunt Jeremy diminished the prospects of tax reductions in his forthcoming Autumn Statement, emphasising that the government’s primary focus is to reduce inflation by 50%.  

“If we are going to put money in people’s pockets quickly, the fastest thing I can do is deliver the Prime Minister’s pledge to halve inflation,” he said.  

“The small business community will be keen to hear how the Government plans to encourage their growth, with the autumn Budget not that far off – the ball is firmly in the Government’s court, states McTague.  

“Concrete actions will be needed to demonstrate to small businesses that politicians are really determined to help them. With small business confidence levels stalling in our most recent research, not doing anything just isn’t acceptable.”   

The latest Small Business Index report by the FSB indicates that small business confidence exhibited a robust rebound from Q4 2022 to Q1 2023, yet it remains slightly in the negative territory (-2.8).  

John Cullen, business recovery partner at Menzies LLP, states that businesses should approach the budget with “cautious optimism”.  

“The recent major financial events, however, means that there is not a great deal of scope for justifying that optimism.  UK plc is not in the greatest of health and cash is not in abundance.  The prudent SME should be looking to plot a course through continued difficult times in the short term.” 

Inflation taking a “massive toll” on businesses  

On 28th July, insolvency statistics released by the UK government highlighted there were 6,342 recorded company insolvencies in Q2, reflecting a 9% increase compared to Q1, and a 13% increase compared to  Q2 2022.  

With 83% of insolvencies relating to small businesses, McTague says: “Inflation has been taking a massive toll on margins, with the eye-watering and in many cases completely unaffordable increases in energy bills in particular causing many small firms to have to sit down and work out whether they could afford to keep trading at all, let alone make plans to expand.”   

Cullen asserts that the insolvency statistics for the second quarter of 2023, which were the highest since 2009, could have been predicted. 

 “UK SMEs should always look to make their own torch.  However, the statistics are not surprising given the support provided during the pandemic which may have kept businesses alive that would have failed despite the pandemic.”   

“UK plc is not in the greatest of health and cash is not in abundance.  The prudent SME should be looking to plot a course through continued difficult times in the short term.”