Confidence among Britain’s small businesses has slumped to its lowest level on record, prompting urgent calls for the Chancellor to use next month’s Budget to halt a potential wave of closures.
According to new figures from the Federation of Small Businesses (FSB), the headline Small Business Index (SBI) for the third quarter fell sharply to -58 points, down from -44 points in the previous quarter – signalling deepening pessimism across the UK’s five million small firms.
Nearly one in three small businesses (30%) now expect to downsize, sell, or close within the next 12 months, while 6% fear they will shut down entirely – the equivalent of around 330,000 potential business closures. By contrast, just 18% of firms expect to grow in the year ahead.
The FSB warned that this decline in confidence underlines the fragility of the small business sector, which employs more than 16 million people and generates more than half of private-sector turnover.
WAKE-UP CALL
Photo by Kelvin Boyes / Press Eye.
Tina McKenzie (main picture, inset), Policy Chair at the FSB, says: “The fact that under a fifth of small firms predict they will grow in the next 12 months, while nearly a third are looking at shrinking, selling or closing down, is horrifying – and a stark wake-up call for the Government.
“We’re calling on Rachel Reeves (main picture, inset) to take bold action in the Budget to support entrepreneurship and ease tax and employment cost burdens on small firms.
“We must turn this around and enable small businesses to grow rather than having their ambitions held back, which in turn hampers economic growth.”
BLEAK REVENUE OUTLOOK
The outlook for revenues is equally downbeat. Just 21% of firms reported higher revenues in Q3, while 55% said turnover had fallen. Looking ahead to the final quarter – traditionally the “golden quarter” for many retail and hospitality businesses – nearly half (49%) expect further declines, compared with only one in five forecasting growth.
Access to finance also remains a critical concern. Only 10% of small firms rated the availability and affordability of new finance as good, while more than half (54%) said it was poor. One in five successful applicants for credit reported being offered interest rates above 20%.
Late payments continue to plague small business cashflow, with 68% experiencing delays and a third (34%) saying the problem had worsened in recent months.
VICIOUS CYCLE
McKenzie adds: “Millions of small businesses shrinking, closing or selling up instead of growing means a vicious cycle of lower tax receipts, higher unemployment and greater demands on the state.
“The Chancellor’s Budget speech will be a make-or-break moment for small businesses. The stakes couldn’t be higher – without small firms, economic growth is a lost cause.”
The FSB is calling on the Treasury to reform business rates, cut employment costs and lower taxes on entrepreneurship in the upcoming Budget, warning that failure to act risks derailing the Government’s wider growth ambitions.
