Challenging winter ahead but positive signs locally
"Despite the challenging outlook, there are some positive signs locally with many of the region’s small firms faring well in the past quarter," says Lee Osborne, Development Manager (Warwickshire and Coventry) at the Federation of Small Businesses.
There are many things that keep small business owners awake at night. However, the cost-of-doing-business crisis, which has come to a crescendo in recent months - from energy costs and inflation to the highest tax burden for years - is the most toxic business environment in recent memory. And it comes on the back of the pandemic when many small business owners’ reserves (and morale) were wiped out.
Without support, the impact was starting to look very bleak; small firms downsizing, or even closing for good as the figures stopped adding up and the scale of price rises needed to offset these soaring costs were simply pie in the sky. Local businesses we heard from included fish & chip shops needing an extra £1,000 a week to pay for energy increases; pubs which would need to pump up prices to £10 a pint; manufacturers facing exorbitant price rises which simply couldn’t be passed on.
The Federation of Small Businesses (FSB) has been hard at work for months to succeed in getting this to top the top of the political agenda. We have been clear in advising Government that it is impossible to solve the cost-of-living crisis without tackling the cost-of-doing-business crisis. We have been successful in securing help for small businesses on energy bills with the recent Government announcement to cap wholesale rates for six months, plus other wins on reducing the tax burden including a reversal of the hike in National Insurance.
Despite this progress, small businesses across Warwickshire are still facing significantly higher bills than they were paying a few months ago. FSB’s most recent Small Business Confidence survey in the West Midlands reveals that 89 per cent of small businesses operating costs are up compared to 2021, with 64 per cent seeing a rise in utilities. On energy costs alone, price rises have either doubled or tripled and some businesses are worried about just how high their next energy bill will go.
Alongside this, inflation is still sky-high, especially for business inputs, where it is running at around twice the rate of that felt by consumers. And consumer confidence in October was only slightly above its all-time low in September, which spells worrying news for countless small firms relying on consumer spending in the so-called golden quarter running up to the festive season.
In speaking with small business owners across Warwickshire, there is huge concern about all these factors. For some, all of their focus is on surviving the toughest winter they have ever faced.
Small business entrepreneurs are optimistic, dynamic and innovative, which is why it is all the more stark to see this drop in confidence locally. They want to be driving growth and economic recovery, but the headwinds against them right now are gale-force.
Recent political and economic turmoil hasn’t helped, which is why it is vital that Government focuses on stability to allow small businesses to trade and plan with confidence. Beyond that, we need to see pro-growth measures such as taking more small firms out of business rates, which they’re clobbered with before they’ve earned a penny. This would be a seriously positive, pro-growth step. Action on late payment would also be a godsend for small firms, opening up flows of working capital to keep them able to trade.
Despite the challenging outlook, there are some positive signs locally with many of the region’s small firms faring well in the past quarter.
Across the West Midlands small firm’s revenue performance improved in Q3 of this year, with 6% more small businesses reporting an increase than those reporting a decrease. This is the strongest performance of all UK regions.
The region’s small businesses are also reporting net employment growth – the first time this has happened this year. When looking at investment aspirations, just under half of respondents expected to grow rapidly or moderately over the next year.
Small businesses can also continue to benefit from a strong local business support landscape across the region with grant schemes and webinars available to provide much-needed help and advice. The value of local support was further demonstrated at FSB’s recent inaugural Local Government awards, with Warwickshire County Council winning two regional awards for their help to the local small business community.
Other local authorities including North Warwickshire Borough Council, Nuneaton and Bedworth Borough Council and Coventry City Council were all shortlisted for awards for support and projects undertaken to help small businesses overcome current challenges or adapt to being future ready.
While it is still going to be a tough winter for many Warwickshire small businesses and the self-employed, the measures secured and local support available may prove to be a lifeline. At the same time FSB is working with other key partners - locally and nationally – and will continue to campaign to secure an environment in which entrepreneurs can flourish and drive economic recovery.