Small firms increasingly worried about UK economy, new report says

Smaller firms are increasingly worried about prospects for the UK economy even though they continue to recruit staff and enjoy greater access to finance, a new report shows.

The Federation of Small Businesses (FSB) said confidence had continued to fall, with business owners feeling optimistic about the future being outnumbered by those who felt the opposite.

A survey of over 1,000 FSB members revealed that just over half were aiming to grow in the next year and many were recruiting.

But the poll, the first by the FSB since the EU referendum, reflected a “fragile” outlook for the economy, with confidence falling into negative territory for the first time since 2012.

FSB chairman Mike Cherry said: “There is no doubt that the political shock of the Brexit result has taken place at a time of weakening business confidence. For the first time in four years, confidence is in negative territory.

“This persistent downward trend in UK business confidence reflects underlying issues that predate the Brexit decision.”

The release of the survey came after a delegation of small business owners from the FSB – including one from Newcastle – met Chancellor Philip Hammond to discuss the need for the Government to focus on policies that will help boost productivity and growth.

Mr Cherry said: “Small businesses are the key to driving economic growth and prosperity across the nations and regions of the UK. While small firms are proving resilient, we want to see some important decisions made by this new Government, and the new Chancellor is clearly going to be a major player.

“FSB members raised important issues facing their businesses directly with the Chancellor, on how to take forward the Government’s agenda around skills, infrastructure, regional investment, and tax. We also raised the importance of the Treasury under his leadership now delivering the business rates reforms announced in the March budget 2016.

“Members want to see progress made to better develop leadership and management skills in small firms, as we believe this will unlock greater potential for innovation and high performance – and indeed productivity.

“Shovel-ready infrastructure projects should be given the green light, and that ranges from flagship UK projects but also smaller-scale investments that have a huge impact on local communities.”

Neil Warwick, a partner specialising in EU and Competition Law at Bond Dickinson
Neil Warwick, a partner specialising in EU and Competition Law at Bond Dickinson

Among the delegation that met the Chancellor was Neil Warwick, a partner at Newcastle law firm Square One Law.

He said: “We talked about confidence in the economy post-Brexit and he was very open to what we had to say. It was a very useful meeting.”

The problem of productivity in the UK has also been highlighted by a report which shows that most UK cities are lagging behind European competitors for skills and productivity.

The Centre for Cities think-tank’s study of 63 UK cities showed that nine out of 10 performed below the European average for productivity and three out of four had a lower proportion of highly skilled workers. Newcastle, Sunderland and Middlesbrough were all below the average for skills and productivity.

Alexandra Jones, chief executive of Centre for Cities, said: “No other economy in Europe is so dependent on the performance of its cities, yet too many of the UK’s urban areas are failing to realise their potential.

“For the country to thrive in the years to come, it’s vital that the Government works with cities to address the skills and productivity gaps holding most places back.”

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