New research from the Federation of Small Businesses (FSB) shows that growth plans are being slowed by Brexit uncertainty.
The Q1 Small Business Index highlights that small firms are pausing recruitment plans, putting off investment and scaling back exports.
Less growth expected
The federation’s research reveals that over the past three months, only around one in ten (11%) small firms have taken on new staff. This figure signifies a record low of new hires. Similarly, 12% are actively decreasing their headcounts.
Export plans are also at an all-time low, with only 27% of smaller businesses that sell overseas expecting to increase exports in Q2. This is compared to a substantially larger 42% during the same period last year. Two thirds (66%) of those surveyed say that their international sales are either steady or falling. That’s up three percentage points on Q1 2018.
A striking 37% say that revenues are down over the first three months of the year while a quarter are flatlining. In the next quarter, fewer than four in ten (38%) expect rising revenues, markedly lower than last year’s 45%.
Record low level in confidence
The UK-wide Small Business Index confidence measure remains negative in Q1 2019 at -5.0, representing a significant drop compared to a year ago (+6.0) and the third negative confidence reading in a row.
‘We’ve suffered 1,000 days of uncertainty since the Brexit referendum, leaving us unable to plan, invest and grow’
This kind of pessimism is a first for the Small Business Index which launched in Q1 2010. A huge seven in ten don’t expect their performance to improve in the next quarter.
FSB National Chairman Mike Cherry said: “Small firms were told that we would be leaving the European Union today with a good understanding beforehand of what the future would hold.
“Instead, we’ve suffered 1,000 days of uncertainty since the Brexit referendum, leaving us unable to plan, invest and grow. Naturally, that’s impacted bottom lines. This failure of the UK political system cannot be allowed to happen again.”
As a result of what’s happened, the FSB is calling on the UK government to give small businesses vouchers that can be spent on preparing for future trade scenarios.
“Thousands have had to shell-out for scenario planning. The least the Government can do now is follow the example set by Ireland and the Netherlands by providing small firms with vouchers to access the advice, equipment and upskilling they need to future-proof their businesses as trade arrangements change. Making soft loans available to small firms for this purpose is also a useful option.”
He talks about the imminent arrival of Making Tax Digital, an increase in business rates and higher auto-enrolment pensions, saying that they couldn’t be coming at a worse time.
“We’ve already seen the UK business population drop in 2018. If this government’s not careful, we could see a further contraction this year.”