Small business finance applications hit six-year low
The volume of small business finance applications has hit a six-year low with just one in 10 SMEs having applied for loans over the past three months
The recent Small Business Index report published by the Federation of Small Businesses (FSB) showed that the number of businesses that have had their finance applications approved has dropped by 18% to 52% since the third quarter (Q3) of 2019.
It also revealed that more than half of these, 57%, were offered borrowing rates of 5% or more.
The survey of 1,383 SMEs found that 14% of businesses had reduced their staff headcount in Q3 despite the furlough scheme still being in place, this figure is a rise of two percentage points on the same period before the Covid-19 pandemic hit.
The vast majority, 81%, are planning to freeze hiring in the next quarter which is an increase of 3% since Q2 2021 when economies were starting to unlock.
Elsewhere the survey found that the new post Brexit trade agreement, the ongoing supply chain disruption, and rise in shipping fees has seen 41% of UK SME exporters reporting a drop off in international sales in Q3. This is up 10% from the same period in 2019.
It also showed that 21% of SMEs are prepared for import checks although one in five have stopped exporting to the EU with a further 7% considering whether to pull out of the export market.
Mike Cherry, national chairman, FSB said: ‘Small business confidence surged at the start of this year but following the announcement of the National Insurance contributions (NICs) hike that resurgence has run out of steam.
‘What we’re left wondering is: where is the government’s assessment of what April’s tax increases could mean for unemployment?
‘The tax rises will be hitting at the same time as a rise in the living wage, and against a backdrop of surging inflation and supply chain disruption, so we need to know how the government is analysing potential repercussions.’
From the results of the survey, the FSB has called on the government to rethink the plan to increase the national insurance contribution for businesses, employees, and sole traders in April 2022.
The federation stated that as its research shows that it is the wrong time to implement this increase and that the Treasury needs to publish its forecast on what it sees for SME businesses after the increase is implemented taking into consideration the current climate.
Cherry concluded: ‘We put together our own estimate and found that the jobs tax increase could cause 50,000 more people to become unemployed. All we’re asking is for the Treasury to publish its own forecast.’
In September, the FSB assessed the potential impact of the tax hike finding that an annual employer NICs for a small business with five employees on salaries of £31,000 will rise to £16,500 with the total annual cost of the hike to the small business community estimated to be £5.7bn.
Story by Ruby Flanagan of Accountancy Daily