Confidence in small business sector hit by VAT rise and bad weather

Last year ended on a low note for many small businesses, according to a trade body representing 210,000 such firms.

The Forum for Private Business (FPB) said confidence at the end of last year among such businesses was lower at the end of the year than at the beginning, thanks partly to the bad weather, rising costs and the looming increase in VAT.

The FPB's 'Voice of Small Business' index found business confidence fell in the fourth quarter of 2010 for the third successive quarter, with research revealing that the private sector recovery lost momentum last year, despite the government arguing it would play a significant factor in taking up the slack for job losses caused by public sector cutbacks.

John Walker, the FSB's national chairman, called on ministers to bring forward plans for growth, including a competitive tax system to boost employment.

"A number of pressures on small businesses are beginning to come to a head, such as the increase in VAT and fuel duty, placing more strain on cash-flow," Walker said.

"This combined with the severe weather at the end of 2010 has meant that small firms are not as confident about their prospects in 2011.

"With inflation above target and the labour market still weak, small firms cannot rely solely on the consumer for growth in 2011. So it is imperative that the Bank of England base rate is kept at 0.5 per cent, as once the impact of the VAT rise is excluded, inflation is relatively low."