The outlook for Britain's small businesses remains bleak, with just one in six expecting growth over the next 12 months, the lowest proportion since records began in 2014. Nearly one in three anticipate shrinking, selling up, or closing their doors for good.
The findings from the latest Small Business Index highlight the scale of the challenge facing the incoming prime minister as he prepares to enter Downing Street. The lobby group warns that the economy requires a huge turnaround, and the incoming prime minister faces a significant test to achieve this.
The gap between firms predicting growth and those predicting shrinkage has reached its widest point, with the net balance turning negative a year ago and remaining below zero ever since. The main culprits behind the lack of growth are the state of the UK economy, taxes, and labour costs, according to a survey of 1,113 small business owners and sole traders.
The state of the UK economy, taxes, and labour costs are expected to act as the biggest drags on growth over the coming year, according to the survey. The lobby group warns that the government must not accept a new normal where more small firms believe they will shrink, sell up, or close entirely than anticipate growing over the next year.
The incoming prime minister has pledged to expand small business rates relief, a live issue for the 104,000 small firms swept into the rates net when April's revaluation collided with a decade-long threshold freeze. The group hopes that the new prime minister will honour this pledge in their first budget.
The trading picture behind the gloom is stark, with only one in five small businesses seeing higher takings in the second quarter. Meanwhile, costs continue to climb, with close to nine in ten firms reporting higher running costs than a year earlier, with taxation being the most-cited reason for the increase.
The group is urging ministers not to let the late payment crackdown slip down the agenda, saying the legislation 'must be prioritised'. The group also hopes that the new administration will recognise that small businesses 'suffer just as much as everyone else when a "Whitehall knows best" culture fails to listen to the people delivering growth on the ground.'
For SME owners, the message to the new administration is clear: the sector that employs millions across every postcode in Britain is running out of road, and the first budget will show whether anyone in Whitehall is listening.
