‘Small businesses key to success’

Posted: 6 Jan 2017

The UK’s prosperity this year will be founded on the success of smaller businesses, says Mike Cherry, national chairman of the Federation of Small Businesses, in his new year message.

In the UK, running a small business and being your own boss is one of the most challenging and satisfying things you can choose to do.

We now have a record 5.5 million smaller businesses and the self-employed, but the rate of growth has started to slow. 
Our country’s prosperity in 2017 will be founded on the success of the smaller business movement. 

In turn, that success rests upon all of us truly creating a new entrepreneurial culture.

This means the whole of society – government and business, customers and employees, public and private sectors – all choosing to support smaller businesses and the self-employed. 

Politicians need to pursue policies that make it not just easier to set up a business, but also to run it, putting small businesses at the very heart of policymaking. 

Teachers need to include running a smaller business as a viable option within careers advice. 

Customers need to decide whether to spend their money with innovative local businesses or distant multinational brands.

Our 5.5 million entrepreneurs are the engine of the UK economy, employing 60 per cent of the private sector workforce.

But there are clouds on the horizon that must be addressed.

Our quarterly Small Business Index constantly tracks confidence levels, and provides a regular health-check for the UK economy. 

Throughout last year, confidence glided down before dipping into negative territory in the third quarter for the first time since 2012.

Smaller businesses have been struggling, and it makes everyone’s words and deeds important in 2017 – where we hope for recovery. 

The UK’s decision to the leave the European Union and the resulting changes in the Government last year did create a huge amount of uncertainty, but new ministers, from the Prime Minister down, have been listening to our concerns and suggestions, as has the Opposition.

Brexit will bring risks and opportunities for our members, and the strategy adopted in the upcoming negotiations must manage down those risks, and accelerate the opportunities it provides. 

Any smaller business owner will tell you that the sheer cost of doing business has steadily risen over the past year, with a range of policy choices hardening at the same time, creating a cumulative effect. 

The introduction of the National Living Wage steeply increased labour costs, just as the roll-out of workplace pension auto-enrolment hit smaller businesses. 

This year starts with a weaker medium-term economic outlook, and the prospect of inflation in the spring.

This will squeeze smaller firms affected by the rising price of imports, supplies and products, but without the ability to move their HQ or workforce, or hedge their costs. 

Smaller firms are anchored in their local community and will need to work out how to cope with margins being squeezed even further.

Given the current climate, FSB wants to help smaller businesses in any way we can. 

We want to directly assist those looking to start a new business with a package of benefits designed for pre-start-ups. 
Our aim is to reduce the risks of setting up on your own and increase the proportion of new starts that thrive. 

As an organisation, we also need to constantly respond to the new challenges that all smaller businesses face. 
With most now affected in some way by cyber attacks, we are introducing comprehensive protection and advice, an area where small and micro businesses are underserved. 

This year will see a big push in HMRC’s Making Tax Digital plans, as the Government makes it mandatory for smaller firms to provide a digital tax report on a quarterly basis. I am dead-set against these proposals. 

At a time when we need businesses to grow, government should not be putting in place a mandatory new tax regulation that will cost businesses on average £2,770. 

Smaller firms are the secret to UK success, not a cash cow for the Treasury. 

FSB is lobbying intensely to persuade ministers to improve these proposals, which should be voluntary and phased.

They should begin by using thresholds to remove more of the smallest businesses from the regime – those who will be least able to cope.

Late and poor payment practice from larger firms remains a huge issue for smaller businesses.

f this is not tackled, then every year, 50,000 businesses will die – leaving £2.5bn of GDP missing – purely due to late payments.

Members will be upping the pressure in 2017, where we want to see reforms promised two years ago now toughened up, and delivered. 

In addition to the Duty to Report regulations coming in and a Small Business Commissioner being appointed, FSB succeeded in putting supply chain respect at the heart of the Government’s Corporate Governance Green Paper. 

We now need to see that enacted so that there is a whole-board ownership of prompt payment practices.

It’s been our responsibility, since FSB was set up in 1974, to shine a light on the challenges that the self-employed face. 

We wish to see a statutory definition for self-employment, as well as parity of benefits such as maternity pay – this is the right way to ensure the growth in self-employment continues.

In short, it’s not just Brexit – there is a lot to do to make this an economy that truly works for everyone. 

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