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20 April 2017

International trade spurs increase in small business confidence and job creation

Despite spiralling costs small firms in the North West are feeling more confident and planning to take on or maintain staff, with international trade playing a major role, according to the latest FSB Small Business Index (SBI).

The recovery has been spurred by increased international trade. More than two thirds (69%) of exporters surveyed in the region state that international sales have been steady or increased in Q1. The vast majority (85%) expect this trend to continue over the coming three months. 

The recovery in confidence comes despite a surge in the cost of doing business. Seven out of ten (70%) small firms across the North West report a rise in operating costs over the past quarter.

The average FSB employer will face £2,600 in additional employment costs over the coming year as a result of the rise in the National Living Wage, resulting National Insurance contributions and pensions auto-enrolment. These cost pressures are being exacerbated by rising inflation. The Consumer Price Index (CPI) rose above the Bank of England’s 2% target to 2.3% in March. Firms are struggling with increased prices when buying supplies, products and services, but the rise in inflation will also impact other bills, such as business rates.

However, the region’s firms remain optimistic about hiring new staff. Almost all (92%) small firms surveyed in the North West expect to maintain or increase their headcounts over the next quarter.

Export, Europe and the International Business Festival 2018

Commenting on the growing importance of export for small firms, and the International Business Festival 2018 in Liverpool, Phil McCabe, Development Manager for FSB Merseyside, West Cheshire and Wigan, said:

“It’s hugely encouraging to see our small businesses trading more overseas, driving an export-led recovery. We know that small firms that export have higher turnovers than those who rely on the domestic market, so it’s crucial that the Government maximises cross-border trade opportunities for small firms.

“That includes negotiating an ambitious free trade agreement (FTA) with the EU as part of the Brexit process. The FTA must include a dedicated small business chapter and ensure the easiest possible access to the single market. Our latest Brexit research finds that over a quarter of FSB exporters would be deterred from trading with the EU27 by a tariff of any size.

“We cannot rely in the long-term on the boost that exporters have received from a weak pound. To maintain export growth, we need to focus on opening up new international markets and getting more small firms exporting.”

“The International Business Festival returns to Liverpool in 2018 for the third time and will again be a fantastic opportunity for businesses to forge links with these overseas markets and explore exporting as a major route to growth.”

Firms hit by rising costs

Phil McCabe added: “At a time of unprecedented political and economic uncertainty, small firms are being hit from all sides by mounting cost pressures. This month alone many have had to absorb a hike in business rates and the National Living Wage. Added to this are costs that have steadily risen, such as fuel, which our members are increasingly pointing to as a major cause of higher outgoings.

“The impacts of the spiralling cost of doing business in the UK are starting to show. The percentage of businesses seeking to grow in the next twelve months, although slightly up on last quarter, remains below the levels seen two or three years ago. Higher numbers of businesses also report they plan to downsize or close over the next year.”

Small businesses and job creation

Phil McCabe said: “Small firms are telling us loud and clear that they want to keep hiring. One fifth of our small businesses with staff employ non-UK EU citizens so guaranteeing the rights of EU workers based here should be a top priority for Brexit negotiators. On the domestic front, an increase in the Employment Allowance must be a key consideration for the Autumn Budget.”

To request a copy of the Q1 2017 SBI, please contact FSB Merseyside, West Cheshire and Wigan. The Q2 2017 SBI will be published in June.