Government must extend National Insurance holiday to all UK businesses as research shows two-thirds of firms in the South East most likely to be under capacity.
Business confidence has worsened over the second quarter of 2010 suggesting that the recovery is still fragile and more should be done to support private sector growth, according to the FSB ‘Voice of Small Business Index’, published today.
In a survey of over 1,200 members of the Federation of Small Businesses (FSB), only a net four per cent of respondents believe that business prospects will improve in the third quarter of the year, down from 16 per cent in March.
The survey also suggests that almost 67 per cent of small firms are operating below capacity, with those in the manufacturing sector faring much better than service sector firms.
This further highlights how the UK economy is still some way from a full-speed recovery, with 64 per cent of firms in the South East likely to be working below capacity – more than anywhere else in the country.
With Government proposals to exempt the South East, London and the East of England from the National Insurance holiday for new businesses, announced in the Emergency Budget, the FSB is concerned firms in the region will not start-up and that existing businesses will not have the support they need to grow and take on more staff.
Key findings from the quarterly report show:
* Small business confidence has faltered each month since March with fewer small firms believing that business prospects will improve, down from 16 per cent to four per cent.
* The majority of small businesses are still operating below capacity, although the proportion of businesses has fallen slightly from 70.5 per cent to 66.6 per cent since the last report.
* Firms operating below capacity are more prevalent in the service sector than manufacturing and are more likely to be based in the South East.
* Revenue growth remains weak and is not expected to improve in the next quarter.
John Walker, National Chairman of the Federation of Small Businesses, said:
“The consensus view from small firms is that the recovery is far from secure and there are significant risks to business growth in the future. With this is mind, as well as the fact that almost 70 per cent of businesses report working under capacity, we encourage the Government to support small businesses to grow and expand.
“With small firms in the South East most likely to be working below capacity, this shows how wrong the Government is to not include this vital region, as well as the East and London, in its proposals for a National Insurance holiday for start-up businesses. While we support the policy we believe that it should be extended to be UK-wide and be available for existing businesses too.
“With 600,000 public sector jobs expected to be lost, stimulating private sector job creation, especially in small firms, will be vital to rebalancing the economy.”
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