Small business confidence in the UK has sharply declined, according to the latest FSB survey.
- The confidence index dropped by 16.3 points in the second quarter to -10.8, highlighting financial strain.
- Rising wage costs are the primary concern, potentially stifling economic growth and reducing job numbers.
- Government policy changes and proposed labor right reforms may exacerbate the challenges faced by small businesses.
- Specific sectors like construction and retail are experiencing severe declines in confidence, demanding urgent attention.
The FSB’s Small Business Index has revealed a significant decline in small business confidence across the UK during the second quarter, marked by a sharp fall to -10.8 points. This significant drop of 16.3 points from the previous quarter underscores the mounting financial challenges faced by small business owners. Soaring employment costs have been identified as a principal factor driving this decline, with businesses grappling with the highest wage costs recorded to date. In addition to rising labor expenses, weaker consumer demand and the prospect of increased tax pressures are further hindering growth.
Tina McKenzie, policy chair of the FSB, has voiced her concerns regarding the impact of rising labor costs on economic growth and job numbers among small businesses. She has highlighted that these costs could severely curb economic momentum. Moreover, McKenzie has expressed apprehension about impending changes in employment law, fearing these changes could heighten the financial risks associated with hiring new staff. The anticipated reforms proposed by the opposition party to enhance workers’ rights could potentially add to the existing burdens on employers.
McKenzie has called on the government to link the employment allowance with the rising living wage as a direct measure to ease the financial strain on small firms. She advocates for a comprehensive review of all government employment policies to ensure they are conducive to growth and job retention. Additionally, the latest FSB report underscores the particular struggles of certain sectors, especially construction, which recorded a confidence score of -20.7, the lowest across surveyed industries. The wholesale and retail sectors followed suit, registering notable declines in their confidence scores.
The manufacturing sector, which had previously shown optimistic expectations with a positive confidence score, experienced a steep fall to -12.7 in the second quarter. The information and communication sector noted a drop to -9.2 points, while the professional, scientific, and technical sector experienced a modest decrease to -2.6 points, making it the least pessimistic of the major sectors. According to McKenzie, these figures highlight the urgent requirement for targeted support, specifically for the struggling construction industry. She recommends reforming the consumer infrastructure levy to help small builders access the financing needed to sustain their activities.
The FSB’s latest report signals urgent calls for government intervention to support struggling small businesses amid challenging economic conditions.
