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October 25, 2011

Small firms losing confidence in economic recovery, says FSB

Confidence among small businesses dropped sharply in the third quarter of this year, research by the Federation of Small Businesses (FSB) has highlighted.

The FSB’s quarterly confidence index fell by 9.6 points to -9.3 for the period from July to September, down from 0.3 in the previous three months. The index, which polled 1,600 members, measures how small firms see their prospects in the coming quarter.

FSB national chairman John Walker said: “As businesses come to terms with the double whammy of falling revenues and rising costs, it’s no wonder that they’re losing confidence. This has to show the Government that a more robust plan for growth is needed.”

Urging the Government to respond to the collapse in confidence, the FSB said it wanted to see an extension to National Insurance tax breaks – currently only available to start-up businesses – to existing small firms. This would help create jobs, it said, and relieve cost pressures on businesses.

The FSB report follows the British Chambers of Commerce’s (BCC) recent quarterly survey, which also highlighted a slump in business confidence. The BCC said many firms were struggling with cashflow and unfavourable payment terms.

Mark Lucas, head of audit, taxation and advisory services at RSM Tenon, said that many small and medium-sized businesses were suffering because restricted bank funding was putting a squeeze on cashflow and growth.

Lower rates of corporation tax were helping some firms balance the books, but Lucas said there was still a squeezed middle that was struggling.

“Low business confidence stems from uncertainty,” he said. “Weak consumer demand, high energy prices and a feeling that we just don’t quite know how the economy is going to look in a year’s time are all contributing to a gloomy outlook amongst small firms.”