Small businesses still fearful over economic prospects

19-Jul-2010 - Last updated on 28-Aug-2011 at 08:58 GMT

Despite the coalition government's determination to haul the UK economy round via spending cuts and tax increases, small businesses are still worried...

Despite the coalition government's determination to haul the UK economy round via spending cuts and tax increases, small businesses are still worried about their own trading prospects, according to new research published today.

The Federation of Small Businesses (FSB) has revealed that only four per cent of 1,200 firms polled believed their business prospects will improve in the third quarter of the year, compared with 16 per cent who were positive back in March.

The organisation's latest survey also found that more than two thirds of companies were operating below capacity, with firms in the service sector more affected than those in manufacturing.

The FSB has also expressed its concerns that with the South East, London and the East of England being shut out of the National Insurance holiday announced by Chancellor of the Exchequer George Osborne - to encourage individuals to start up businesses and create jobs - there will be no such start-up activity in these areas, while existing companies "will not have the support they need to grow and take on more staff".

John Walker, National chairman of the FSB, 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."

Walker said that with 600,000 public sector jobs expected to be lost in the coming months, "stimulating private sector job creation, especially in small firms, will be vital to rebalancing the economy."