Small firms call for “most ambitious Budget in modern history” as one in five overlooked by existing support

• Federation of Small Businesses (FSB) research shows 1,000,000 small firms left out of support measures, including those in supply chains saddled with rents and rising business rates.  
• New figures show shortcomings of sector-based support, with analysis indicating majority of furloughed staff work outside of retail, leisure and hospitality.
• UK’s largest business group recommends extension of business rates reliefs and cash grants as well as support for suppliers, directors and the newly self-employed; calls for incentives to bring workers back from furlough before job retention scheme ends and renewed efforts to tackle a late payment crisis exacerbated by lockdowns.  

FSB is encouraging the Chancellor to use next month’s Spring Budget to address gaps in the business support landscape as its latest research highlights the shortcomings of a sector-based approach.

Fresh FSB analysis of government data shows that more than half (56%) of workers furloughed to date are employed outside of the retail, leisure and hospitality sectors, but firms that do not neatly fit the definition for these industries – including suppliers to hotels, restaurants and event venues – are only entitled to around 10% of support grants.  

An FSB survey of more than 1,000 small business owners finds that one in five (22%) state that they have received no financial help at all from the UK Government since the start of the Covid pandemic. A separate study by the group shows that only half (51%) have been able to access a cash grant and a tiny proportion (5%) have received any discretionary help from their local authority.  

There are 5.9 million small firms across the UK, according to the Department for Business, Energy and Industrial Strategy (BEIS). The one in five figure suggests that in excess of 1,000,000 small businesses and sole traders have been left without any direct support.

The fresh research also reveals that the burden placed on small firms by business rates is growing, with one in three (34%) seeing their bill rise over the past five years and one in ten saying their bill “has increased by a lot”. Fewer than one in ten (8%) say their bill has reduced in size.*

Small business owners suffering from rising rates often take the hit directly, with more than half (52%) reducing profits as bills soar. Others cut investment (17%), increase prices (14%) or reduce staff numbers (14%).

A third (32%) of those with rising bills say they would be more likely to take on staff if their rates bill fell and one in four (26%) would be more likely to take on an apprentice. Small retailers are especially hard hit by rates, but just one in seven (15%) have been granted a rent holiday by their landlord.  

As a result of the findings, FSB is calling on the Chancellor to:  

–          Extend cash grants and business rates reliefs to those within supply chains suffering from severe falls in revenue.

–      Extend business rates exemptions introduced at the start of the Covid crisis to 2022 and permanently bring the rateable value ceiling for small business rates relief up to £25,000.  

–      Introduce a fresh retention bonus for employers who bring staff back to work from furlough and reduce Employer National Insurance Contributions (NICs) before the retention scheme closes whilst creating new support mechanisms for those out of work and thinking about launching an enterprise.  

–      Extend flagship support schemes to cover the full periods over which restrictions are in place and adopt FSB’s proposals for bringing those with 2019/20 tax returns into scope of the Self-employment Income Support Scheme and launching a Directors Income Support Scheme.

–      Reinvigorate efforts to end the UK’s late payment crisis, strengthening corporate Audit Committees to take action against poor practices made worse during COVID against a backdrop in which firms that start to trade again in the summer may not be paid until the autumn.  

–      Build on Pay As You Grow to move the UK’s small business community out from under an unsustainable debt mountain, considering tax liability and employee ownership models.

–      Provide a roadmap to reopening which encompasses measures to facilitate digital adoption, investment and upskilling within small firms.

FSB National Chairman Mike Cherry said: “The Chancellor’s plan for jobs will only succeed with the right plan for businesses. Firms need help to bring furloughed workers back in the near-term alongside long-term measures to help them manage the ongoing impact of lockdowns.  

“While the Government rightly moved at pace last Spring to deploy business support, we can now see the shortcomings of a sector and property-based approach. Small firms which sell to other businesses outnumber those which sell to consumers three to one – thousands don’t have a commercial premises or neatly fit the definitions of retail, leisure and hospitality. Too many have been left out of support measures as a result.

“We urgently need to see support measures extended to the hidden heroes within our supply chains who tirelessly drive our economy forward. It’s not too late to bring those left out into the fold, but the Chancellor needs to act fast.

“Equally, the worsening of our late payment crisis will impact small firms for many months to come – a lot firms taking on work now will not be paid until the summer, if at all. The Chancellor should use this Budget as an opportunity to show real leadership on this front.   

“Last year we suffered the biggest GDP drop in modern history. We now need the most ambitious, pro-business Budget in modern history to reverse the damage.” 

*The other 57% state that their bills have remained the same or the question regarding rates is not applicable to them. The latter group includes firms that operate from a domestic premises or have a landlord that handles their rates bill.  

Notes to Editors
1) FSB surveyed 1,055 small business owners between 3 and 14 December 2020 and 1,451 between 22 September and 2 October 2020.     
2) For a full copy of FSB’s Budget submission, contact Matt Dickinson.

About FSB
As experts in business, FSB offers members a wide range of vital business services, including advice, financial expertise, support and a powerful voice in Government. Its aim is to help smaller businesses achieve their ambitions. More information is available at www.fsb.org.uk. You can follow us on twitter @fsb_policy.

Media contacts
Matt Dickinson: 075 2580 1773 matt.dickinson@fsb.org.uk