VAT cut and NIC holiday required to rebuild confidence among SMEs

News Article - 28 October 2011
Category: Business

The Federation of Small Businesses (FSB) believes a targeted VAT cut and a National Insurance Contributions (NICs) holiday should be implemented to combat declining small business confidence.

Small business confidence dropped to -9.3 under the pressure of weak demand and rising running costs according to the FSB's 'Voice of Small Business' Index.

The Index has been a reliable indicator of the path Gross Domestic Product (GDP) has taken in recent months, with SME confidence declining rapidly from +0.3 to -9.3 in Q3 2011.

The FSB has maintained the current NICs holiday should be extended to UK firms with fewer than four employees. One-in-10 businesses (11 per cent) agreed extending the NICs holiday would give SMEs the incentive to take on more staff.

To re-engage consumer demand the FSB also believes a time-specific VAT cut would encourage people to spend and break the barrier to economic growth in the UK.

John Walker, national chairman of the FSB, said: "As businesses come to terms with the double whammy of falling revenues and rising costs, it is no wonder that they're losing confidence, and unfortunately, as their overheads increase one way to control it is to lay off staff.

"It is the first time since we started the Index that we have seen more people believe that they're going to lay off staff than take them on. This has to show the Government that a more robust plan for growth is needed."

It is not the first time this year the Government has received pressure to help stabilise small businesses and boost growth.

In August David Kern, chief economist at the British Chambers of Commerce (BCC), called on the Government to "explore more policies to help boost growth, such as reducing regulatory burdens which prevent businesses creating jobs and wealth."

Article keywords: fsb, sme, small business, vat, vat cut

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