One in five small employers rely on staff from the EU

One in five small employers rely on staff from the EU

The UK’s waning productivity levels won’t improve any time soon, according to the latest Small Business Index (Q2) from the Federation of Small Businesses (FSB).

Political uncertainty is the key barrier in business expansion and boosting productivity levels.

Finding staff is also proving difficult, with 35pc of small businesses struggling to find appropriately skilled employees. That’s the largest proportion since Q3 2015. The net balance (the proportion of those hiring new staff minus the proportion reducing their team size) is at a three-year low at -2pc.

A massive seven in 10 businesses (72pc) are not planning to invest in their own companies over the coming three months – the highest since Q2 2017. What’s more, ONS figures reveal that business investment fell over four consecutive quarters for the first time since the financial crash in 2008.

Mike Cherry, FSB national chairman, said: “It’s impossible for small business owners to invest for the future when we don’t know what the future holds.

“We urgently need to see both prime ministerial candidates spell out their plans for supporting small firms and securing a pro-business Brexit – one that encompasses a comprehensive deal and a substantial transition period. Fast and loose talk about accepting a chaotic no-deal Brexit in four months’ time is not helpful.”

Be the Business, the Government’s productivity think-tank, thinks it will be at least 10 years before UK business productivity gets to where it should be.

James Gribben, senior corporate affairs manager at Be the Business, said: “The UK has experienced a decade of under-performance and we will need a decade of improvements to turn things around.”

Net migration from the EU also fell to 74,000 in the year ending December 2018, down from 189,000 to the year ending June 2016. It’s bad news for small employers as one in five (21pc) say they rely on staff from the EU.

Improving small business productivity

Gribben said: “The good news is that there are big opportunities for small businesses to find performance gains. We already have some of the most productive companies in the world. Ambitious small business owners can close the gap with our most productive firms by learning how they operate and adopting more effective practices – it’ll take small but concerted efforts to do it.”

“We found that businesses that have improved the most, plan and take specific action to improve. Making small changes in the right place can lead to outsize performance improvements.”

New credit ‘unaffordable’

Worryingly, 43pc of small businesses also said that new credit is ‘unaffordable’, which is the highest percentage since Q1 2015. Fewer than 15pc of successful credit applicants are using external finance to grow their firms, down ten percentage points compared with the same period last year.

Mike Cherry added: “With so much uncertainty afoot, caution among lenders is understandable. They seem happy enough to issue new credit in some cases but are upping premiums to cover themselves.

“Against this backdrop, it’s more critical than ever that the British Business Bank is properly equipped to build on its vital work in providing start-up loans and enabling equity investment in small firms. A sudden withdrawal of European Investment Fund support for small businesses without a suitable domestic replacement would be catastrophic.”

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