Lack of access to finance threatens businesses’ growth plans
A lack of access of finance is threatening small firms’ growth plans this year, the Federation of Small Businesses (FSB) has found.
The trade body surveyed 1,271 small firms for its Small Business Index and found that 54 per cent anticipate to grow over the next year, a four per cent rise from the fourth quarter of 2019, prior to the impact of the pandemic.
However, one in 10 (11 per cent) small businesses said access to finance is a barrier to growth, and four per cent reported that the cost of finance is holding them back.
Nine per cent said they applied for finance in the last quarter, the lowest proportion in seven years, and 45 per cent had their application approved, a seven-year low.
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Furthermore, a third (33 per cent) said a lack of appropriately skilled staff is another substantial barrier to growth and over a fifth (22 per cent) said that labour costs are a key barrier to expansion.
These represented a 10 per cent increase and nine per cent rise respectively from the fourth quarter in 2020.
78 per cent said that operating costs are growing, a seven-year high, while 40 per cent cited gross profits as falling in the last quarter of 2021 as inflation hits margins.
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“After two years of turmoil, in which firms have once again shown their adaptability and resilience, the small business community stands ready to spur our economic recovery,” said Mike Cherry, national chairman of the FSB.
“The majority intend to grow over the coming 12 months, and many are looking to increase headcounts.
“Their optimism is, however, hampered by spiralling inflation, labour shortages and looming tax grabs. Come April, they’ll be faced with a jobs tax hike, an increase in dividend taxation and fresh business rates bills.
“We urgently need the government to start looking closely at the policies that will empower the small business community to spur our recovery from this recession as it did the last. The growth intentions are there, but we need the right support to turn vision into reality.
“The bounce back loan initiative was a real success, but it can’t be thought of as job done. New enterprises are launched everyday across the UK, never more so than at times like this when the economy is changing apace. Our start-ups need funding to go on and be the employers and innovators of tomorrow.
“After the financial crash we saw banks pull-up the drawbridge for small businesses. With emergency loan initiatives and the New Enterprise Allowance at an end, it’s vital that this trend doesn’t take hold once again.”
The research also showed that 16 per cent of small businesses hired more staff in the fourth quarter of 2021, the highest proportion since the second quarter of 2015. And 17 per cent expect to increase headcounts this quarter.