The Forum of Private Business is warning companies that they could alienate their workers, including umbrella contractors, if they scrap this year’s office Christmas party.

It is thought that at least 50% of small firms will cancel the annual festive party this year, but according to the FPB this could cause demotivate staff and leave them unwilling to go the extra mile for the business in the future.

Many SMEs are finding that cash is in short supply, but festive frolics don’t need to be expensive and the benefits of providing an annual get-together should not be underestimated, said FPB chief executive, Phil Orford. As well as motivating staff, these events encourage communication and reward employees when pay increases and bonuses are not a feasible option.

The FPB suggests that companies not providing a party should come up with other morale boosting ideas such as obtaining discount vouchers for meals and putting elaborate decorations up in the office. Demonstrating that you recognise the hard work done by your employees can mean more to them than a gift or financial bonus, the FPB added.

In addition to abandoning the traditional Christmas party, several SMEs intend to shut down for less time than they usually would over the festive period.

A survey conducted by Close Invoice Finance discovered that 36% of SMEs will be open for two days longer than in previous years and another 22% will cut the usual holiday by three days. Nearly half of the surveyed businesses said they were worried that staff would take sick days leading up to Christmas and many have reminded employees that they will face disciplinary action if they take unauthorised absence.

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Umbrella company contractors are no doubt well aware of the Agency Workers Directive that came into effect at the beginning of October.

Basically, AWR was designed to put contractors and temporary workers on an equal footing with their permanent counterparts when it comes to pay and working conditions.

Ever since AWR was announced, some companies have been looking for ways to get around it.  Tesco recently confirmed that it was going to use the Swedish derogation model to avoid paying its temps the same wages as its permanent employees.  In order to do this, Tesco will source temporary staff from recruitment agencies that directly employ their temps.

The Agency Workers Regulations do contain anti-avoidance measures, but employers are legally entitled to use the Swedish derogation model. The Sunday Telegraph recently reported that Tesco has asked a recruitment agency that supplies it with truck drivers in Kent to employ the temps directly. As a result, 400 drivers could lose £150 a week.

Tesco has defended its actions saying that a lot of agencies are using the derogation to ensure that temporary work remains flexible and competitive. The government, the Confederation of British Industry and the British Retail Consortium have all recognised this approach.

The supermarket giant added that this move is not a Tesco initiative and it is not asking agency workers to sign a new contract.

Meanwhile, the FPB has launched a new guide to help employers understand the recent changes to UK employment law.

The chief executive of the FPB, Phil Orford, explained that employment law can seem like a minefield that is continually changing. AWR is one of the biggest changes we have seen in recent times and it is vital that employers understand their responsibilities and stay on the right side of the law.

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Red tape is putting a lot of organisations off investing in the UK, according to recent research from BDO.

The firm surveyed CFOs from 750 medium-sized companies in 13 countries around the world, including the UK, for its Global Ambition Survey. Almost all said they were positive about their international expansion plans, even though the economic climate is going through a period of turbulence.

In three years time, 46% of UK organisations revenues are predicted to come from operations overseas. Worldwide, CFOs expect overseas operations to contribute 44% to their revenues; up from the current 37%.

However, 34% of international CFOs say that bureaucracy and red tape are a key challenge for organisations investing in the UK. 45% cited intense local competition and 43% said currency fluctuations were also considered a key challenge.

When it comes to expectation of revenue growth, the UK ranks 8th, according to BDO’s Global Market Opportunity Index. China and Brazil come in at number 5 and are thought of as three times more attractive as a destination to start up overseas operations than the UK.

74% of CFOs in the UK think they will have no problem obtaining funding for expansion. However, 68% of UK CFOs think it will be a challenge to find local people with the right skill set and more than three quarters of them said their focus over the next three years would be investing in people.

Kim Hayward, an international liaison partner at BDO, said it was encouraging to see UK CFOs displaying optimism about expansion overseas, but the UK could miss out on inward investment. The government needs to address the problem of red tape if we are going to encourage global companies to invest here.

Meanwhile, the UK’s small businesses think excessive taxes and red tape are stopping them from going green.

According to a recent report from the FPB, 77% of smaller businesses think it is possible to improve their green credentials, but 52% cited green taxes as the barrier to reducing their use of energy. A large proportion also think that the current regulations favour large organisations and do not factor in the problems faced by smaller businesses.

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After last week’s disappointing jobs statistics showed that youth unemployment is still increasing, the REC has called on the business community to become involved in proactive initiatives such as the Youth Employment Charter.

The latest figures from the Office of National Statistics show that 973,000 young people are without a job, a month-on-month increase of 78,000.

Tom Hadley, the director of policy and professional services at the REC, said that while is the overall situation is one of concern, youth unemployment is one of alarm. The REC continues to push the government to come up with tangible measures, such as giving employers an NIC holiday if they take on young people, but the business community also has a major role to play.

The Youth Employment Charter aims to raise awareness and aspirations among future workers through co-operation with colleges and schools and by highlighting instances of how recruiters are making a real difference.

Meanwhile, David Cameron is urging MPs to get out and about in their constituencies and experience day-to-day life in a small business.

The FPB has set up the Business Buddy Scheme to help politicians gain an insight into the problems facing the small business community. Oliver Letwin, the Cabinet Office minister, has already taken part by visiting Bridport Gourmet Pies who are based in his constituency in West Dorset.

The PM says he has also been visiting small businesses in his constituency in West Oxfordshire and he praised the diversity of the businesses that range from cutting-edge design to specialist shops and renewable energy companies.

Cameron wants the UK to be entrepreneur friendly, but to achieve that the government has to understand the issues SMEs face on a regular basis. Armed with that information, the coalition hopes to ensure that entrepreneurs receive all the help they need to start off and grow a successful business.

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Umbrella contractors may be interested to learn that the government recently disclosed the locations of the remaining 13 English Enterprise Zones that it hopes will help kick-start economic growth.

New zones will be set up in Cambridgeshire, Cheshire, Cornwall, Gosport, Hereford, the Humber Estuary, Kent, Leicestershire, Norfolk, Northampton, Oxfordshire, Suffolk and West Essex.

Businesses in Enterprise Zones will benefit from superfast broadband, cheaper business rates and less planning control.

Glenys Chatterley, the chair of the Mid and North West Essex branch of the FSB, said the West Essex zone would create a focal point for employment and business growth. She explained that more than 100 new firms will be attracted to the zone area and an extra 2,500 jobs will be created. She went on to say that she expected the West Essex zone would focus on health and medical technology companies.

The Cornwall zone will be based around Newquay and focus on the aerospace sector. The MD of Newquay Cornwall Airport, Al Titherington, said the zone was important to the entire economy of Cornwall and would enable companies to create high-value jobs.

However, Phil McCabe from the FPB pointed out that there was a similar scheme in the 1980s and that didn’t work because it simply relocated existing workers rather than adding new jobs.

David Cameron has said the present government is determined to make Britain the best place to start a business and Enterprise Zones are a key part of the plan. By reducing business taxes and easing the restrictions on planning, companies stand a better chance of being able to invest and expand. The government expects the Enterprise Zones will create an additional 30,000 jobs by 2015.

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New research from Aviva shows that around 10% of small firms in the UK are worried they might have to close this year if trading conditions do not improve.

Aviva surveyed 500 small businesses and discovered that a mere 13% feel positive that the British economy will improve, whilst 28% think that we might drop back into recession.

David Bruce, Aviva’s commercial product manager, said confidence among SMEs is at its lowest since the start of the global downturn and many are now seriously concerned that they will lose their business if the economy doesn’t improve this year.

The FPB was not surprised by these findings and believes the general pessimism is caused in part by the lack of accessible funding for small enterprises. The banks taking part in Project Merlin have so far failed to meet their key lending targets. However, the current economy could offer business owners the opportunity to move into niche markets and high redundancies mean there is a strong pool of candidates to recruit from.

17% of firms are using sales and discounts to keep their business thriving and another 17% have had to resort to permanent price reductions. 14% are looking to cut salaries or benefits, and 9% are thinking about reducing their permanent headcount.

The downturn in demand is affecting nearly 66% of firms according to Lovetts, the commercial debt recovery law firm.

The government has come up with measures to help small businesses, such as the New Enterprise Allowance and the Red Tape Challenge, but these have not brought about an entrepreneurial uprising.

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Eric Pickles, the Communities and Local Government Secretary announced last week that the British Chambers of Commerce will have sole responsibility for uniting the network of local enterprise partnerships.

The network will provide a forum for local business leaders to exchange ideas, solve problems and access the latest data required to promote the UK’s economic growth.

The coalition wants to see local areas taking control of their economic future. LEPs are owned locally through partnerships between civic and business leaders and these leaders will decide local economic priorities and encourage growth and job creation in the local community.

David Frost, the BCC’s director general, said the Chamber was delighted to be at the centre of the new network and would work tirelessly to make sure it helps enterprises across England grow.

However, various business organisations are disappointed that the BCC has been given sole responsibility for the group. They believe that this move means that wider business concerns will be ignored. Furthermore, they are concerned that this decision was taken without the opportunity being put out to consultation or tender.

The national chairman of the FSB, John Walker, said he supports the move to bring LEPs together but pointed out that there are several business organisations, representing different sectors, which are all striving to make LEPs successful. If the scheme is to be truly effective, these organisations should be entitled to represent diverse business interests.

Miles Templeman, the Director-General of the Institute of Directors, was of a like mind saying he was both surprised and disappointed that the government had appointed the BCC without consulting other business groups.

FPB chief executive, Phil Orford, explained that many of the members of his organisation still don’t understand the concept of LEPs and how they will support local growth. He also expressed his disappointment with the government for its lack of transparency and consultation in reaching its decision.

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As budget day looms ever closer, various organisations have been urging the government to create an environment that supports entrepreneurs, small businesses and umbrella company contractors.

The FSB claims that the UK’s small enterprises have a crucial role to play in the economic recovery and therefore the government must demonstrate a commitment to helping them grow.

National chairman, John Walker, pointed out that last year was tough and this year doesn’t look as if it’s going to be much better with unemployment remaining high, government austerity measures biting and GDP contracting.

There are 4.8 million small enterprises in the UK and they are well placed to aid the recovery, but to do so, they need help. George Osborne needs to use the Budget to provide businesses with incentives to hire more staff and to make it viable for unemployed people to become self-employed.

The Forum of Private Business wants to see more done to ensure funding is available to SMEs and limited company contractors. Although Project Merlin is supposed to address this problem, the Forum says that increasing lending to SMEs by 15% is not going to be enough to solve the funding crisis.

The chief executive of the FPB, Phil Orford, points out the process surrounding lending is too complex and this has led to a subdued demand for credit. He wants the government to improve transparency, affordability and flexibility in SME lending as banks will be unable to meet the 15% target if demand remains at its current level.

The CBI also wants the government to take steps to help private and family-owned businesses grow. John Cridland said the coalition needs to tackle the burdensome regulations which distract business owners from creating jobs and growing their companies.

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In its election manifesto, the Conservative party promised to implement a fuel duty stabiliser and the FSB is urging them put it in place as soon as possible.

The small businesses that many umbrella company contractors work through are now on a knife-edge because of record duty and the increase in VAT that have led to 3.5p being added to the price of a litre of diesel or petrol, the Federation pointed out.

A fuel duty stabiliser would freeze fuel duty increases and reduce the duty to match increased VAT revenues from higher prices at the pumps.

The Fuelcard company has also called on the coalition to implement the stabiliser saying it would provide a much needed lifeline to SMEs.

David Cameron said last week that a fuel duty stabiliser was still an option and the government was currently looking into its feasibility. However, the Office for Budget Responsibility has already looked into the stabiliser and reported that it was too costly and impractical to implement.

The Forum of Private Business has suggested that the best solution to tackle soaring prices would be to reduce the duty imposed on fuel. The UK charges the second highest price in Europe for diesel and 62% of that price is made up of taxes.

By reducing the duty, the government would be helping to secure the economic recovery by providing support to SMEs that are struggling to pay record fuel prices, the forum’s chief executive Phil Orford said.

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The FPB has warned small firms that they will face a number of challenges over the next few years.

Spokesman Phil McCabe pointed out that small firms traditionally suffer more when a country starts recovering from a recession rather than during the actual economic crisis.

At the moment, credit is severely restricted as a result of the crisis and the growth finance necessary to hire more staff and get better contracts is at a premium.

This scenario is likely to remain with us over the next few years, although this is largely dependent on what moves the government takes to stimulate growth in the private sector after the public sector spending cuts.

Bank lending to SMEs has dropped by 4.5% this year, according to a survey by the CEBR. Many SMEs and umbrella company contractors have been put off asking their bank for finance due to the high cost of borrowing. Costs are likely to increase further in 2011 as new EC banking legislation will require banks to raise their capital cover ratios.

The CEBR survey also showed that business confidence has fallen this year among companies will less than 250 staff. These firms generate annual revenue of over £1.6 trillion compared to the £1.4 trillion of revenue accounted for by FTSE 100 companies. SMEs also contribute 53% of the total business tax revenue.
The CEBR has called on the government to reduce the corporate tax rate for small businesses below 20%.

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Business rates have increased dramatically even though the previous government pledged to help companies through the recession.

Some of the High Street devastation we can now see is mainly due to business rates rising by 11% in the three years to end of March 2010, according to Financial Mail.

The Department for Communities and Local Government says that the rates businesses pay are linked to the RPI, but this has only risen by 7.44% over the three year period. In 2007/8, the Treasury collected £17.4bn, in 2008/9 the figure was £19bn and in 2009/10, £19.4bn was collected in business rates. The average rates bill in 2009/10 was £11,432, a rise of £1,102 from 2007/8.

Phil McCabe from the FPB said that struggling firms have been hit extremely hard by this significant increase.

The situation is not likely to improve next year either unless the coalition takes some action quickly.

The annual increase in commercial property rates is based on the RPI for September. The RPI figure for September was 4.6% which will produce a much higher increase than most businesses had budgeted for. Retailers in particular are expected to be badly hit by such a rise, especially at a time when public sector spending cuts have dented consumer confidence.

The director general of the British Retail Consortium, Stephen Robertson, has already sent a letter to the government urging them to change the way they calculate next year’s increase. He pointed out that nobody expected inflation to fall as slowly as it has been doing. Retailers faced with massive rates increases will have to trim costs elsewhere and this will prevent them from creating new employment to soak up some of the public sector fall out.

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Rather than reversing the trend for late payments, a new directive from the EU could actually make matters worse, according to the FPB.

Many public sector organisations currently have a ten-day settlement target and the forum is concerned that the implementation of a standard 30 day period could cause those bodies to abandon speedy settlement. For example, recent FPB research shows that the NHS pays contractors within 10 days in 90% of cases. On the other hand, some organisations are unable to settle any invoices in 10 days and some struggle to pay 20% within 30 days.

Phil Orford, the chief executive of the FPB, agreed that the Late Payments Directive should help tackle the problem small businesses and freelancers are facing due to late settlement of invoices, which is currently thought to be costing the UK economy £24 billion.

However, he also pointed out that although not all public sector bodies have adopted the ten day payment rule, abandoning it would be a step backwards and could encourage those who currently pay up quickly to increase the waiting period for settlement.

Late payment of timesheets has become a real problem not only in the UK but across Europe as a whole. In Italy, the average public sector settlement time is a huge 100 days whilst private sector companies take an average of 66 days to pay their debts.

The FPB has long been campaigning for legislation to cope with the problem of late payment and the Prompt Payment Code was introduced to help combat the problem. However, signing up is optional and not many large businesses have pledged to settle in full and on time. And many small businesses remain reluctant to take on late payers through fear of losing the contract.

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