The latest Federation of Small Businesses (FSB) London Small Business Index (LSBI) is released today and it shows a mixed picture with London bucking many UK trends. The report highlights positive news surrounding increases in profits, investment intentions and growth aspirations for London.
However, we are still in high negative confidence territory, and what is evident from these results is that the ability for employers to get the skills they need has become the second highest barrier to growth. With 42% of businesses saying it is the single biggest barrier to growth.
Key findings and statistics:
CONFIDENCE
- The LSBI, which measures confidence amongst businesses, has marginally risen versus the previous quarter. Confidence currently remains negative, however, and stands at -29 as of Q4 2022. In Q3, it stood at -33
PROFITABILITY
- In Q4, 41% of London small businesses reported an increase in profit. In contrast, 33% reported a decrease. The net balance figure of 8% outperforms the reported countrywide average net (-10%)
EMPLOYMENT
- 18% of London small businesses report falling staff numbers over the last three months, with 13% increasing headcount.
WAGE GROWTH
- In London, two thirds of businesses (67%) increased salaries over the previous 12 months. This is notably on par with Q3 2022 when 66% reporting increases. 61% expect to see salary increases in the next quarter, and only 3% expect salaries to fall.
INVESTMENT INTENTIONS
- The investment intentions for London businesses are well above the UK average.
- 41% of small businesses in London said that their growth aspirations in the next 12 months were to grow either rapidly or moderately
BUSINESS CONCERNS
- In London, appropriately skilled staff has grown considerably as a concern for businesses, with over 4 in 10 (42%) saying it is the greatest perceived barrier to growth, when in Q3, 27% of small businesses pointed to this as a major issue. The general economic conditions (56%) is still the greatest concern
FSB are calling for:
- The Mayor of London and/or DfE to introduce an Apprenticeship Grant for microbusinesses.
- HM Treasury to remove the 25 per cent cap on Apprenticeship Levy transfers. Currently, Apprenticeship Levy payers can transfer up to 25 per cent of their unused funds; increasing this to 100 per cent would lead to more apprenticeship opportunities for small businesses.
- A ramping up of Skills Bootcamps by introducing 50+ Skills Bootcamps, which would provide the skills older people require to remain in or re-enter the labour market. To encourage older workers who became economically inactive due to the pandemic to re-enter the workforce.
- FSB London are also keen to see action taken to support small businesses who will be impacted by the extension of the Ultra-Low Emission Zone in August 2023. At this critically difficult time for struggling small businesses, any introduction of the scheme should be accompanied by further mitigation measures on top of the Diesel Scrappage Scheme. Making the extension non-chargeable for the first year would be a welcome measure along with further investment in the scrappage scheme.
FSB London Policy Chair, Rowena Howie, said:
“With the current economic conditions being so tough it is welcome to see some positivity with growth and investment intentions still high on the agenda for many small firms in the capital. But for many sectors there is simply no wriggle room left. For a business in a high energy-reliant commercial property, the debts and costs are only going one way. The Spring Budget must show a clear path back to growth and supportive measures for firms who can’t take further uncertainty. We are also keen to see measures taken to tackle the skills crisis currently engulfing London’s small business community.”
The survey took place between late December and early January 2023 with 249 London responses received.
You can view the full Q4 2022 report below.