BUSINESS COLUMN: We now need Government support to continue our recovery from recession

The Federation of Small Businesses has published its latest Small Business Index, which shows confidence in the West Midlands is fragile, with trading conditions remaining extremely challenging, while costs and inflation are soaring, writes Lee Osborne, development manager at Warwickshire and Coventry FSB.

Margins are getting tighter for small businesses
Margins are getting tighter for small businesses

The survey is a quarterly analysis of small business confidence based on recent performance, current trading conditions and future aspirations.

In terms of profitability the picture is mixed. Around a third saw an increase in their gross profit margins, but almost half experienced a decline. Looking ahead, the outlook for profits was finely balanced, with just over a third of firms expecting margins to be squeezed further and a similar proportion expecting an improvement.

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Contrasting with this evenly balanced position, more than half of the firms surveyed said they had increased average salaries and almost three-quarters anticipate that their wage bill will increase over the year.

This, coupled with other rises in the cost of energy, raw materials plus the National Insurance hike and business rates bills falling due in April, will stoke up greater pressure on small businesses margins.

Late payments are one of the biggest challenges that small businesses face, and regrettably the survey shows this remains a huge threat.

Poor payment practices alone are threatening the

viability of more than 36,000 (eight per cent) of small firms in the West Midlands.

However, more positively, employment levels have remained broadly stable. Investment intentions have also entered more positive territory since the previous quarter, and more than half of small firms across the region expect to grow in the year ahead.

These achievements and ambitions need to be nurtured by policymakers, not snuffed out.

That’s why FSB is calling for the planned rise in National Insurance to be scrapped, or at least partly offset by an increase in the Employment Allowance from £4,000 to £5,000 and for an increase in the small business rates relief ceiling to £25,000.

Business has a role to play too, especially in improving payment practice. We are calling for every large UK corporation to have a non-executive director with direct responsibility for payment culture. Plus, every big business and government organisation should be abiding by the prompt payment code, with 30-day payment terms being the rule, rather than the exception.

We now need Government to start looking closely at the policies that will empower the small business community, that make up 98 per cent of businesses across Warwick and Leamington, to spur our recovery from this recession as it did the last.