Leave small firms alone, FPB warns Darling

FPB stresses that small firms are already cracking under the strain of government regulations

On the eve of the 2008 Budget, the Forum of Private Business (FPB) has urged chancellor Alistair Darling to refrain from heaping extra financial burden on smaller firms.

According to a recent survey from the Small Business Research Trust (SBRT) carried out in conjunction with the FPB, the volume of smaller busineses reporting a fall in sales increased from 26 per cent to 33 per cent, compared to 2007. Investment growth declined significantly - micro businesses reporting growth of five per cent, down from eight per cent, small businesses seeing growth drop from eight per cent to two per cent, and medium sized firms reporting a decline of 18 per cent - just nine per cent growth compared to 27 per cent the previous year.

Phil Orford, chief executive of the FPB, said: "The SBRT has been providing one of the largest regular surveys on the performance of smaller businesses in the UK since 1985. The results of the most recent survey are frightening and highlight the vulnerability of small businesses at the present time. "The survey shows trading conditions have declined significantly this quarter in all areas of sales, employment and investment, with only medium-sized businesses suggesting any growth in levels of employment.

"This contrasts with the optimism expressed at the end of 2007, where confidence in the future level of economic growth still showed signs of remaining stable. Expectations have weakened considerably since the last quarter; each measure has moved into a negative balance and all sizes of businesses, in all regions of the country, now expect a much lower performance for 2008."

"There is now little doubt that, for the UK’s small businesses, trading activities have gone into decline from the stable or gradual growth position over the last year," said the SBRT’s Chairman, Brian Wolfe. "Whilst, for some businesses, it can be said that employment has remained stable or even grown slightly, the overall picture is one of a general decrease in employment levels, especially for the micro-business community."

Most of the smaller businesses surveyed were pessimistic about the prospects for future growth, with just 28 per cent expecting sales to grow, with 12 per cent forecasting an increase in employment and 16 per cent greater investment.

Orford added: "There are 4.3 million small businesses in the UK employing 58 per cent of the private sector workforce. That equates to 13 million people. Small firms contribute 50 per cent of the UK’s GDP," said Mr Orford. "This government has undertaken a sustained attack on smaller businesses and their owners for too long. We are close to the tipping point where a sector that provides innovation and drive to the UK’s economy is going to be pushed into a long period of negative growth. This is a simple equation that the Government seems unable to comprehend – negative growth in the smaller-business sector will lead to negative growth for the UK."

"The Chancellor needs to wake up to the reality of the situation and be brave by providing support for the cornerstone of the UK’s economy. We are calling for a review of, and at the very least a delay in, the implementation of these additional burdens, given the evidence that smaller firms are already in decline."