Thursday, June 30, 2022

FSB says small firms are pressed on all sides as Bank of England cranks up base rate to 1.25%

The Federation of Small Businesses is warning that small firms are pressed on all sides by rising costs, with the cost of borrowing set to increase further following the Bank of England’s decision to crank up the base rate to 1.25%.

Federation of Small Businesses Policy and Advocacy Chair Tina McKenzie said: “This latest rise illustrates something every small business owner will be acutely aware of. Rising costs are running out of control, and the operating environment for small firms is tougher than it has been for some time.

“The increase will make access to finance for small firms more expensive. This makes announcing a successor to the Recovery Loans Scheme, which ends later this month, even more important.

“FSB figures show finance application approvals drying up, so banks must promote the new scheme in good faith. And if we see a credit crunch following, as we did in 2008, having a scheme like this from the British Business Bank already up and running could be crucial, to combat the recession and protect small businesses from going under through a lack of cash.

“The Bank of England recently used the word stagflation in connection to the current economic crisis, which is noteworthy and deeply worrying. Low growth coupled with high inflation will be a death knell to countless small businesses.

“This is a scary moment. It’s hard to overstate how devastating the current spiralling inflation levels are, for businesses and consumers alike, and the longer the situation goes on, the more the damage compounds.

“The Bank is required to try and rein inflation in, although there are question marks over how much it can actually do, given that many of the factors behind inflation, from war in Ukraine to oil prices, are outside its control.

“Anything which adds to the margin pressure small firms and sole traders are facing – such as an increase in debt costs as the base rate rises – is hard to swallow. Small businesses are bearing the brunt of this crisis, with cash reserves eroded throughout the pandemic and with late payments intensifying.

“The Government needs to act now. Households have rightly received help with their energy bills, while big businesses are able to use their bargaining power to get better deals from energy companies, but small businesses – especially micro businesses, with under 10 employees – are left high and dry and at the mercy of spiralling prices. We would like to see small businesses receiving relief via a reduction in business rates or a direct reduction to energy bills like the support households received, and for micro businesses to be eligible for the consumer price cap.

“Today saw a fresh record for fuel prices, which hit small businesses hard. A further reduction in fuel duty, or even a cut in fuel VAT, would help ease the pain.

“More widely, a cut in VAT would give the economy a real boost, and would be a lifeline to countless struggling businesses. At the very least, cutting VAT on energy would offer real help.

“Some of the funding provided for businesses by the Government over the course of the pandemic, such as the Covid Additional Relief Fund, remains unspent, and councils should redouble efforts to get the funding out to firms who really need it.

“Looking ahead, what businesses want is a reduction in uncertainty, and a sense that those in charge have plans to help the economy grow while understanding what businesses need in order to thrive. The levelling up agenda is great in theory, but we’re still waiting for real progress to be made. The long-delayed Enterprise Strategy should be brought forward, and late payments – which destroy thousands of otherwise-viable businesses every year – must be tackled through recently-announced audit reforms, with corporate boards made directly responsible for payment practices.”

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemichaving a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £31.50 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.

Latest news

Related news

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.