- Federation of Small Businesses (FSB) calls for a “jobs first” approach from government as new study shows substantial share of smaller firms forced to let employees go
- Recommends broad job market support measures as well as targeted interventions for young people and those more likely to face labour market disadvantage
- Stresses need to help those left out of existing schemes, cut Value Added Tax (VAT) and equip small firms for the ‘new normal’
Small businesses are having to make redundancies, cancel training programmes and scale-back investment following weeks of COVID-19-linked disruption, according to a new FSB study of more than 1,000 firms.
The fresh research finds that two thirds (67%) of UK small firms have furloughed staff as a result of the pandemic, while others have been scaling back capital investment (37%), reducing working hours (25%) and cutting training initiatives (14%).
Despite much-needed support from the Job Retention Scheme, one in ten (9%) small firms have already been forced to make redundancies. Among those with at least one member of staff aged 16-17 the figure rises to one in five (19%).
Smaller firms employ 16.6 million people, equivalent to 60% of the private sector workforce, according to the latest figures from the Department for Business, Enterprise and Industrial Strategy (BEIS).
Previous FSB research shows that one in three small business owners who had been forced to close during lockdown until restrictions were eased were unsure about their ability to reopen.
The vast majority (86%) say they’ll have to alter their premises to trade safely, with more than a quarter (28%) saying set-up expenses alone will cost them in excess of £1,000.
Ahead of tomorrow’s economic intervention, FSB has been calling on the Treasury to consider:
- Broad measures to aid job retention and creation, including cutting Employer’s National Insurance Contributions (NICs), or uprating the targeted Employment Allowance, while extending NICs holidays.
- Further steps to help apprentices and young people trying to enter the workplace – assisting small firms with their training and wage costs.
- Interventions to bolster consumer demand, especially in sectors most affected by the lockdown, such as a temporary VAT cut.
- Making support available to those who have been left out of existing business support schemes, including company directors and the newly self-employed who have been left without help for more than 100 days.
- Ensuring all small firms can reclaim the cost of sick pay in instances where staff who have suffered from COVID-19 in the past develop secondary health conditions or have to self-isolate as a result of the track and trace programme.
- Tailored support packages for small businesses in areas where local lockdowns have been imposed and introducing ‘back to work’ vouchers to enable small firms to recover the costs of making their premises safe.
- Taking a student loan-style approach to state-backed emergency loans for small businesses, allowing them to start repayments once they are making a profit.
- Accelerating delivery of unprecedented investment in the UK’s broadband and mobile infrastructure, whilst widening access to R&D tax credits and introducing digital vouchers to encourage new-to-firm, not just new-to-market, innovation.
FSB National Chairman Mike Cherry said: “Although small firms are thankfully able to continue furloughing staff for months to come, many are already having to make tough decisions.
”The Chancellor needs to take a jobs first approach tomorrow. Bringing down employment costs and increasing opportunities will be central to recovering from this recession.
“After the financial crash, nine in ten people who left unemployment to re-join the workforce did so through a small business or self-employment, so it’s clear where support should be targeted.
“It’s vital that we have the right help in place for young people who are trying to enter the workplace for the first time or are having qualifications disrupted.
“The Prime Minister’s opportunity guarantee pledge is welcome, and we look forward to working with government on how to make it manageable in a small business context.
“Where apprenticeships are concerned, small business owners will need help with both wage and training costs.
“It’s important to recognise that, while the vast majority of small businesses have benefited from emergency support measures, some have missed out.
“The Chancellor and Business Secretary must make every effort to ensure that no-one is left behind as they draw-up the next round of interventions.
“If the new normal means more ecommerce, home-working and cashless trading environments then we need to see every single one of the UK’s 5.8 million small businesses online with a strong web presence, no ifs no buts.
“That starts with a fit-for-purpose broadband network and incentives to adopt new-to-firm, not just new-to-market, innovations.”