By Colin Borland

 

Government Budgets are often like a bouquet of helium balloons. When they’re delivered, fresh out the box, they’re all shiny and exciting and reaching for the sky.

Then in the days and weeks that follow, they slowly deflate and look less impressive. The September mini-Budget, however, did not so much crumple and sink, but rather did a passable impression of the Hindenburg.

Whenever you seek to describe anything that’s happened in the last two and half years as “unprecedented” that animated paperclip from the 1990s should pop up saying, “It looks like you’re writing in cliches. Would you like help to stop?”

But it’s fair to say that even those of us who recall Black Wednesday, or more recently the banking crash, have never experienced anything like the events of the last three or four weeks.

As remote as the international financial markets might seem to many just trying to get on and run their business, there’s no question that the recent political and economic turmoil is having a real-world impact.

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Take the latest quarterly index from the Federation of Small Businesses, the fieldwork for which was carried out at the end of September as the fall-out from the mini-Budget intensified. This showed another significant drop in confidence, down nearly 14 points on the previous quarter to minus 45.7. For comparison, the reading was above zero at the same time last year.

The figures also show that with inflation going back into double digits and hitting a 40-year high, nine out of ten small businesses have seen costs increase. Unsurprisingly, rises in fuel and utilities are the biggest drivers.

As wider inflationary pressures bite, almost half of smaller firms expect to see revenues fall in the next quarter, with fewer than one in five looking forward to an increase. This will, in part at least, be down to shakier consumer spending, with households getting ready for another round of belt tightening this winter. Indeed, a survey from the BBC last week found that more than half of us expect our financial position to worsen in the next six months.

So the figures suggest an outlook of higher costs and lower or stagnant revenues. This is not a recipe for growth.

The immediate challenge for the UK Government is delivering some stability and breathing space for those in business. That means, for example, delivering on help with energy bills for small firms and reversing the hike in National Insurance.

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Time is of the essence and those savings must be in the pockets of small firms by next month, followed by clarity on what will happen to energy bills after the initial six-month programme of support ends.

At the same time there will be opportunities in the Scottish Government’s budget, due by the end of the year, to protect small firms and free them up to drive growth.

Alongside retaining the lifeline Small Business Bonus Scheme, for example, we could deliver targeted support for smaller firms hit hardest by rising energy costs, many of which also had a particularly tough time during Covid. While there’s debate about the amount of money that may be available we could pay for this, or some of it, by repurposing any unspent Covid grant funding.

It also makes sense, when everything is so stretched, to pause the implementation of all but the most essential new business regulations – and to fully assess the impact of whatever is in the pipeline.

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And it’s more important than ever that we get as much economic and social value for whatever public money there is to spend by giving local small businesses a fairer crack of the whip in public procurement. One smart move would be to introduce binding targets for increased government spending with micro businesses.

We should never underestimate the tenacity and determination of small businesses to beat the odds and stay afloat, but neither should we take it for granted. If certainty isn’t realistic, they at least deserve stability as they plot their route to the other side.

Colin Borland is director of devolved nations for the Federation of Small Businesses