The Federation of Small Businesses (FSB) is urging the Treasury to look at what its plans to increase employer, employee and sole trader National Insurance contributions, as well as dividend taxation will mean for smaller firms.
FSB’s call comes as its latest full Small Business Index report, published today (November 15), shows one in seven (14%) smaller firms reducing headcounts in Q3 2021, despite furlough still being in place.
This is up by two percentage points on the same period in 2019, before Covid hit.
Where is the government’s assessment of what April’s tax increases could mean for unemployment?
Mike Cherry, chairman, FSB.
Among the nearly 1,400 survey respondents that inform the study, the vast majority (82%) are not planning to increase staff numbers this quarter.
This figure is up by three percentage points from Q2, when economies were starting to unlock.
With a new EU-UK trade agreement now in effect, supply chain disruption ongoing and shipping fees rising, more than four in 10 (41%) exporters reported a drop in international sales last quarter, up 10 percentage points on the same period in 2019.
Only about one in five (21%) are fully prepared for the introduction of import checks next year.
More than one-fifth of firms have stopped exporting to the EU
The same proportion (21%) have temporarily or permanently stopped exporting to the EU and a further 7% are considering doing so.
Elsewhere, the volume of small business finance applications has hit a six-year low – just one in 10 (10%) have sought new facilities over the past three months.
The share having applications approved (52%) has dropped 18 percentage points from Q3 2019. More than half (57%) were offered borrowing rates of 5% or more.
‘Resurgence has run out of steam’
FSB chairman Mike Cherry said: “Small business confidence surged at the start of this year but – following the announcement of a jobs tax hike – that resurgence has run out of steam.
“What we’re left wondering is: where is the government’s assessment of what April’s tax increases could mean for unemployment?
“The tax rises will be hitting at the same time as a rise in the living wage, and against a backdrop of surging inflation and supply chain disruption, so we need to know how the government is analysing potential repercussions.
“We put together our own estimate and found that the jobs tax increase could cause 50,000 more people to become unemployed. All we’re asking is for the Treasury to publish its own forecast.”
FSB – UK’s largest business group – recommends increasing the Employment Allowance and relaunching the SME (small and medium-sized enterprise) Brexit Support Fund.
Mr Cherry added: “With employment intentions subdued among small firms – which were the most reliant on the furlough scheme – we urgently need to see the government increase the Employment Allowance to help community businesses recruit, retain and reskill over the coming months.
“Equally, too many small exporters – often our most innovative and profitable firms – are struggling to get across new paperwork and preparations for import checks.
“As such, policymakers should revamp and relaunch the SME Brexit Support Fund, widening the eligibility criteria, and making deadlines for applications more realistic.”
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