SMEs call for government help as base rate rises again

With the Bank of England increasing the base rate from 5% to 5.25%; marking the fourteenth hike in a row, small firms are calling for government help.

Federation of Small Businesses (FSB) National Chair Martin McTague, commented, “With concerns about a recession triggered by high interest rates growing, today’s base rate decision adds to the drip-feed of economic bad news that small businesses have weathered since the cost of doing business crisis got its grips into the UK.

“Our latest barometer of small business confidence found it stalled significantly between the first and second quarters of the year, with interest rate rises undoubtedly a huge factor behind the fall.

“Low-cost finance for small firms has almost entirely disappeared, according to our research, a trend which this latest base rate rise will exacerbate. That’s highly unhelpful news for productivity and for growth.

“Yesterday, the Prime Minister claimed that small businesses are ‘booming’ – but we’d class what he said as more of an aspiration at this point, unfortunately. The latest figures for business closures and insolvencies underline the scale of the challenges facing small firms, as even beloved and well-established local firms can’t keep up with rising bills amid falling sales.”

Martin added, “Consumer footfall levels stumbled in July, with downpours and transport woes certainly not helping. It’s especially concerning that high streets – where independent businesses tend to cluster – saw more of a hit than out-of-town shopping centres and retail parks, whose high rents make them out of reach for the vast majority of small firms.

“Looking across the Atlantic, the US Government seems to have inflation on the run, as politicians there have recognised that a growth agenda as well as inflation suppression is needed to curb rising prices.

“The numbers tell the story, with US inflation at 2.97%, and annualised GDP for Q2 2023 rising strongly to 2.4%; UK inflation is still at 7.9%, while our GDP fell by 0.4% in the 12 months to May, with the Bank of England today downgrading its medium-term growth predictions. There are lessons there for the UK, for politicians who are really serious about helping our 5.5 million small firms and self-employed people.

“If small firms are to boom, as we want them to, the Government could do a lot to help create the conditions for them to rebound. We want to see a comprehensive menu for small business growth and recovery on the table – from clamping down on late payment, to extending business rates relief, to increasing the VAT threshold. The risks of stagnation and low productivity far outweigh the estimated costs of sensible policies to help small firms.”

To find out more about contracting please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.