Step up to the plate, firms urge Government, as they publish Budget asks ahead of Conference

By Federation of Small Businesses - 04th October 2021

FSB calls on the Conservatives to support small firms in the Budget

  • Federation of Small Businesses (FSB) sets out measures to secure recovery and save taxpayer funds
  • Calls come ahead of Conservative Party Conference and after Labour was seen to “throw down the gauntlet” with regards to pro-business policies and tax cuts to boost small business growth​
  • New FSB research reveals struggles of small firms trying to win public contracts, and potential for a National Living Wage (NLW) rise to increase inflationary pressure  

“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.  

Writing to the Treasury to introduce wide-ranging recommendations, FSB’s Chair Mike Cherry and Vice Chair Martin McTague warn 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 today, 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 £25,000thereby 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 delivering greater success in helping people to join workplaces than the Work Programme.

FSB’s National Chair Mike Cherry said: “The Government spent billions to save the economy during the pandemic, but that support is now ending and we need to move into a new phase. To get the recovery right, the Government must start to listen to small businesses once again. It’s time to give our 5.9 million small businesses and sole traders a break if the Government is serious about securing a recovery.

“On the eve of its conference, the Conservative Party risks losing the trust of small firms which are bracing for a rise in the jobs tax at the same time as having to deal with haywire input cost rises across the board. Combined, these developments will make it hard for businesses to take on or retain employees, while cutting into the margins that would otherwise be used to invest, stunting their potential growth.

“This is a week after the Opposition opposed the jobs tax, and pledged radical reform to business rates including reducing tax for 200,000 small firms – both moves welcomed by the small business community. The Conservative conference and the Budget must see the party step up to the plate, rediscover its entrepreneurial zeal, and offer more than tax grabs to fund growing public sector spend. To be a party for small business, what is its offer?”

“Good financial management starts at home, so better management of public procurement costs is a must; taking more control of expenditure and making programmes deliver what they’re supposed to – and adapting them if not. The same approach applies to the super-deduction, which will be used by big businesses while 96% of small businesses say it’s not for them.

“If enacted, our proposals would drive forward a cross-region, all-nation ‘levelling up’ agenda from the grassroots, by giving small businesses the chance to thrive, strengthening local areas and boosting employment in places where new jobs are needed most.  

“We’ve set out detailed, costed, easily actionable measures that will help secure an economic recovery.

“With its conference getting underway and Budget going live later this month, we hope the Government listens, and delivers.”

To get the recovery right, the Government must start to listen to small businesses once again. It’s time to give our 5.9 million small businesses and sole traders a break if the Government is serious about securing a recovery.

- Mike Cherry, Federation of Small Businesses
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