Ease tax burdens to boost recovery, government urged

1 July 2009

The UK’s small business sector is experiencing tentative signs of a recovery, according to a new survey.

The Federation of Small Businesses (FSB) said that a poll of 4,400 business owners found that trading conditions for small firms are beginning to improve since a low point at the end of last year.

However, the business group called on the government to aid the rate of recovery by lessening tax and regulatory burdens.

The survey revealed that more firms are enjoying a rise in trade, with 23 per cent of respondents saying that they have noted an increase in business. Back in February that figure was just 16 per cent.

Just as importantly, 57 per cent of businesses said that they were “quite confident” about the future, while 68 per cent reported that they plan to expand during the next six months through investment in new products, additional staff and more marketing.

At the end of last year, almost four in ten small businesses identified the cost of finance as a significant problem. The latest poll showed only a quarter were worried about credit, suggesting that small firms are benefiting from a gradual easing in liquidity.

Although cash flow issues are still to the fore, with a third of businesses claiming that customers are late in paying, there has been some relief here too. Back in September, 51 per cent of firms were complaining about the length of time it took customers to settle invoices.

The FSB argued that the government could help place small firms in the vanguard of the recovery by providing extra support for apprenticeships, introducing short-time working subsidies and increasing the thresholds before income tax and National Insurance contributions are payable.

John Wright, the FSB’s national chairman, said: “Small businesses are naturally flexible and innovative in recessions and these figures show that despite the very many negative forces on them, they are being cautiously optimistic and are looking to expand.

“Although we are certainly not out of the woods yet, many small firms are seeing increased footfall and finding it easier to obtain crucial finance than in the winter months, when things were at their worst so far.”

But Mr Wright added that the government needs to play its part by easing the bureaucracy and tax burdens which many small firms still face.