Small firms aiming for growth this year but fears over skills shortages and costs

The business group’s Small Business Index (SBI) found that of the more than 1,200 UK small firms survey, 54 per cent expect to grow over the next year.

The figure is up four percentage points on the fourth quarter of 2019 when the Covid pandemic had yet to impact commercial activity.

Mike Cherry, national chairman of the FSB, said: “After two years of turmoil, in which firms have once again shown their adaptability and resilience, the small business community stands ready to spur our economic recovery.

“The majority intend to grow over the coming 12 months, and many are looking to increase headcounts.

“Their optimism is, however, hampered by spiralling inflation, labour shortages and looming tax grabs.

“Come April, they’ll be faced with a jobs tax hike, an increase in dividend taxation and fresh business rates bills.”

Close to one in six, 16 per cent, increased headcounts in the three months to December, the highest proportion since the second quarter of 2015.

A similar share, 17 per cent, expects to increase headcounts this quarter – the figure is up seven percentage points on the fourth quarter of 2020.

With the labour market tightening, six in ten, 61 per cent say they are increasing wages – the highest share since the fourth quarter of 2019 – and a third, 33 per cent say a lack of appropriately skilled staff represents a substantial barrier to growth.

The latter figure is up 10 percentage points on the fourth quarter of 2020. One in five, 22 per cent, cite labour costs as a top barrier to expansion, up nine percentage points over the same period.

More widely, the share stating that operating costs are rising, 78 per cent, has hit a seven-year high.

Four in ten, 40 per cent, report that gross profits were down over the final three months of the year as inflation erodes margins.

Elsewhere, one in ten, 11 per cent, of those surveyed flagged access to finance as a barrier to growth, and 4 per cent state that the cost of finance is holding them back.

Fewer than one in ten, 9 per cent, say they applied for finance last quarter – the lowest proportion in seven years.

The minority, 45 per cent, had their application approved, a figure which is also at a seven-year low. The majority, 52 per cent, were offered a borrowing rate of four per cent or more. One in ten, 13 per cent, were offered a rate of 11 per cent or more.

Mr Cherry said: “We urgently need the Government to start looking closely at the policies that will empower the small business community to spur our recovery from this recession as it did the last. The growth intentions are there, but we need the right support to turn vision into reality.

“The bounce back loan initiative was a real success, but it can’t be thought of as job done. New enterprises are launched everyday across the UK, never more so than at times like this when the economy is changing apace. Our start-ups need funding to go on and be the employers and innovators of tomorrow.”

---

Support The Yorkshire Post and become a subscriber today.

Your subscription will help us to continue to bring quality news to the people of Yorkshire. In return, you'll see fewer ads on site, get free access to our app and receive exclusive members-only offers.

So, please - if you can - pay for our work. Just £5 per month is the starting point. If you think that which we are trying to achieve is worth more, you can pay us what you think we are worth. By doing so, you will be investing in something that is becoming increasingly rare. Independent journalism that cares less about right and left and more about right and wrong. Journalism you can trust.

Thank you

James Mitchinson