The FSB has called on politicians to stop playing politics when it comes to the economic recovery and formulate a realistic plan to help small businesses grow.

Ed Balls, the Shadow Chancellor, has been vocal in his call for the 20p VAT rate to be reversed but the FSB thinks this would not be a sensible move and could actually harm the UK’s fragile economy.

The Federation thinks that rather than reversing the rate, the UK should do as some other EU countries have done and implement a temporary cut in VAT to 5% in the tourism and construction sectors for a period of 12 months.

Such a move would kick start growth, lead to the creation of more jobs and increase the amount of money the Treasury receives. The FSB believes this is a much better option than rushing through infrastructure projects costing £5 billion. The FSB also says Labour must develop more policies to bolster growth than just cutting VAT and that real talks must commence into ways of rebuilding and strengthening the economy.

John Walker, the FSB’s national chairman, said that unless we see a more aggressive, proactive approach to growth the economy is going to decline. The Federation agrees that action must be taken, but reversing the VAT increase is not the answer.

The UK has a very fragile economy at the moment and the political parties shouldn’t be kicking it around like a football at their party conferences. Instead, the parties should stop sparring and work together to deliver tangible growth policies.

Although business owners in the UK have little confidence in the national and world-wide economies, they are still confident about the prospects for their own company over the next six months. Only 25% of business owners think the coalition is doing enough to encourage growth and stimulate the economic recovery.

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New research suggests that the personal finances, and private lives, of a lot of small business owners are suffering because of the rising costs associated with running their own company.

The study, conducted by the Centre for Economic and Business Research and Make it Cheaper, discovered that 47% of small business owners have had to inject some of their personal finances into their company this year.

89% of SMES think the UK is an unbearably expensive place in which to conduct business and a lot of them are only surviving by supplementing their company cash flow with their own personal finances.

The MD of Make it Cheaper, Jonathan Elliott, said the effects of cost increases and squeezed margins are not only affecting companies, but also the financial security of the businesses’ owners and families.

Another survey, this time form Bibby Financial Services, shows that more than 25% of SMEs feel they are only just surviving. 24% say trading conditions have deteriorated further since last year and 35% expect the UK economy to remain in the doldrums until at least 2014.

Edward Rimmer, the UK chief executive of Bibby, said businesses are still a long way away from a full recovery and although turnover is currently stable, there is a danger that negative growth could turn into a backward slide and lead the UK back into recession.

24% of small enterprises this that the economic recovery can be best helped by a loosening of lending criteria. Despite this doom and gloom, 70% of businesses in East Anglia are optimistic about their future and 50% share the same optimism in several other areas of the UK.

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The current transitional jobs market could prove to be a godsend for umbrella company contractors.

There is still a great degree of uncertainty as far as the economic recovery goes, as the results of two new surveys shows.

The regular “Voice of Small Business” survey from the FSB shows that owners of small businesses are starting to feel more confident but despite this, most of them have no immediate plans to take on additional staff.

The latest “JobsOutlook” from the REC shows that only 23% of employers intend to increase their workforce in the coming quarter. On the plus side for contractors, 93% of employers say they maintain or increase the amount of temporary workers they use in the short term. 81% also said this would be their long term strategy.

However, that may be set to change in October when the Agency Workers Regulations are implemented.
Last week the REC held an AWR summit in London and delegates were warned that the regulations could lead to large scale reductions in the usage of temporary agency staff.

Nigel Toon, the HR director at Allied Milling, told the summit that he is responsible for anywhere between 200 and 700 temporary workers at once. If he maintained his current temporary workforce once the regulations are implemented, it would cost the company an additional £36,000 every week. He said Allied would be significantly reducing the number of agency workers it uses rather than face an extra £2m annual cost.

Kevin Green was quick to reassure delegates that 70% of agency use was with SMEs and therefore the cost implications were not the same as they were for large corporate like Allied Milling.

A straw poll was taken during the summit and 58% of attendees said they were already making plans for implementation of AWR. 34% said that had some awareness of the requirements whilst just 6% said they were totally prepared.

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Lord Oakeshott, the former Liberal Democrat Treasury spokesman has accused the UK banks of hindering the economic recovery by refusing finance to small enterprises and charging extravagant rates when they do.

Official data from the Bank of England shows there are huge discrepancies between the interest rates paid by large firms and their smaller counterparts. An SME is charged an average interest rate of 3.69% on a £1 million loan, but a large organisation borrowing in excess of £20 million, pays only 1.78%.

Lord Oakeshott says this approach is making a mockery of attempts to solve the lending crisis. This data is gruesome proof that the banks are choking the UK’s economic recovery. The coalition must put pressure on the banks immediately if it wants to prevent small firms seizing up.

The BBA reported recently that net lending to companies dropped by £4.7 billion in March after a drop of £4.6 billion the month previously.

The Central European Banks have also reported that despite a slight improvement recently, businesses still struggle to obtain finance. This news led the chairman of Success Strategy, John de Groot, to advise British entrepreneurs to think about different ways of getting finance including approaching family and friends.

He explained that banks look at a wide variety of factors when a business applies for a loan. These include the applicant’s credit rating, motivation, viability of a proposal and the amount of money the entrepreneur will contribute to fund that proposal. If smaller firms cannot satisfy these requirements, borrowing from friends and family could prove to be a better alternative.

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The CBI has welcomed the government’s new StartUp Britain campaign saying it could encourage more people to set up their own business.

The question is, will any umbrella company contractors decide to take the plunge?

The initiative has been backed by companies including Barclays, Google and Virgin Media and will offer new start-ups support worth £1,500 in practices such as online advertising and IT.

The CBI’s head of enterprise and innovation, Dr Tim Bradshaw, commented that StartUp Britain is part of a group of government initiatives to stimulate the UK economy. More people could be encouraged to become entrepreneurs if they receive the necessary guidance and support.

Bradshaw added that the changes to entrepreneurs’ relief and the cut in corporation tax announced in last week’s budget were particularly welcome.

So far more than 60 companies have pledged support worth millions of pounds to the StartUp campaign. AXA is giving 10% off the price of business insurance, Google will provide new businesses with limited free advertising and O2 is offering free line rental for one month.

Other organisations, such as McKinsey & Co, will run programs to encourage innovative graduates to become entrepreneurs.

The coalition wants to start educating children on the benefits of entrepreneurship from an early age. Every English school will receive government support to run a company through the Enterprise Champions Programme. Furthermore, 250,000 youngsters will be loaned £10 so they can enter the Tenner Tycoon competition.

Small firms will also be able to pitch their ideas through an online tool on how they would improve the efficiency of government. The best ideas will be selected by a group of civil servants and the winners will receive intensive mentoring from the UK’s most successful entrepreneurs.

David Cameron said he wants to see a country where entrepreneurs are setting up on every street, in every area of the UK. The recovery has to be led by the private sector and the StartUp Britain campaign is part of the plan to make that happen.

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Low-income households and the elderly have been badly hit by the recession, according to research conducted by the BBC and the Institute for Fiscal Studies.

Although everybody in the UK has been affected, the country’s poorest households have seen their income decrease by 2.1% in the last three years.

Stephanie Flanders, the BBC News economic editor, pointed out that so far the recovery has put more pressure on household budgets than the recession did. Already struggling families have been hit by a drop in income of £182 a year instead of the £428 increase they would have enjoyed if economic uncertainty were not present.

Pensioners have suffered even more, seeing a loss in income of £456 a year plus a cut in their winter fuel allowance.

Tax and benefit changes introduced between 2008 and 2011 have reduced the real income of the very rich and the very poor, she concluded.

Meanwhile, the National Institute of Economic and Social Research recently said that the pensions and healthcare costs of ‘baby boomers’ will cost tax payers between £80bn and £90bn extra every year in the future.

The report discovered that the over 40s, who have been benefiting from state pay-as-you-go benefits, have created a multi-trillion pound commitment that needs to be met by future generations. A typical 65 year old has received £223,183 more in net state subsidy than the tax paid and a newborn will have to pay £159,668 in taxes during their lifetime to compensate.

The research assumes the government needs to balance the books in the long-term and is based on current projections and policies. The projected shortfall is primarily driven by the increasing pressure on health and pensions rather than a rise in the fiscal deficit caused by the economic crisis.

In order for public finances to get back on a sustainable footing, taxes, including income tax, would need to increase by an additional 6% of GDP. This would provide the Treasury with an extra £88 billion or 16% of total tax receipts.

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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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Have you been inspired to become an entrepreneur because of TV? If so, you’re not alone, according to research from the Department for Business, Innovation and Skills.

Programmes such as Dragon’s Den, The Apprentice and the Secret Millionaire have tempted many people, including former umbrella company contractors, to start their own enterprise.

The government’s minister for business and enterprise, Mark Prisk, says the media plays a vital role in portraying entrepreneurship in a positive light. It’s encouraging to see there has been a dramatic shift towards self-employment recently and I hope the trend continues, he continued.

The coalition is focused on encouraging growth and helping new enterprises start up will create new jobs and transform the UK economy, he added.

90% of established freelancers and entrepreneurs also think that the increased media attention has a positive effect on people’s ambitions.

James Caan, the Dragon’s Den entrepreneur, has joined up with NatWest to offer free advice to people who want to become self-employed. The bank is to run a free live interactive webinar with Caan and is offering participants the chance of winning one-on-one mentoring.

Caan said there is no single guide that tells people how to create a profitable enterprise but seeking advice early on will increase the chance of success. He hopes that sharing his experiences through the webinar will encourage people to turn their dream into reality.

The small business chairman at NatWest, Peter Ibbetson, said the economic recovery depends on new enterprises entering the arena so he’s delighted that James Caan is going to encourage them. NatWest currently helps nearly 2,000 new enterprises every week, so there are definitely plenty of opportunities out there, he added.

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The government must prioritise the up-skilling of workers in areas where the UK has skills shortages.

The REC has pointed out that the UK economy could suffer another dip if the talent shortage problem is not addressed quickly.

Over the past month, there was an increase in both permanent and umbrella company temporary placements according to the latest Report on Jobs, which is published by the REC and KPMG.

Roger Tweedy, who is in charge of research at the REC, said that recruiters believe that finding suitably qualified candidates is going to be a major challenge next year across many sectors.

IT and engineering are already suffering skills shortages and the private sector recovery could be held back by this lack of skills availability. In addition to looking for ways to boost job creation, the government needs to make sure we have the skilled talent necessary to meet employer demand.

However, the skills shortage crisis could spell good news for talented IT umbrella company contractors who bring with them not only the requisite skill set but also the flexibility needed to meet employer’s short-term demands.

Meanwhile, Dean Shoesmith, the president of the Public Sector People Managers’ Association, has suggested that public sector bodies should invest in training to improve employees’ basic skills.

He claims that it is essential for workplace morale to make sure all employees have adequate skills and by doing so the public sector could achieve its aim of doing more for less. Not only can training boost morale, it improves the performance of employees which in turn leads to better customer service, he added.

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There is a mixture of cautious optimism and trepidation amongst freelancers as we start the countdown to 2011. We still have to see the full impact of the government’s CSR and a lot of umbrella company contractors are feeling anxious about their future prospects.

Prime Sourcing, the IT recruitment specialists, has suggested that some organisations will reduce the amount of contractors they use next year. However, there will be plenty of opportunities for IT contractors in areas such as consultancy, banking and systems software suppliers.

Jeff Brooks, the chairman of Prime Sourcing, said that as well as London and the south east, areas such as Birmingham and Manchester should also have good opportunities next year.

Outsource UK says prospects look to be steady rather than spectacular for contractors in the coming year. The IT recruitment firm is seeing continued demand for people with business-technical skills in distribution, financial services and retail.

IT professionals working in the retail sector have been enjoying increased demand for their services over the past six months. Retailers have been investing in core e-commerce platforms or replacing their existing ones and upgrading their supply chain and core merchandising systems. Within the next 12 months, almost 20% of retailers will be either replacing, or implementing for the first time, e-commerce platforms, according to Martec. And there is now a shortage of candidates with the key skills required by retail organisations.

Meanwhile, IT recruiter, Harvey Nash, recorded a gross profit increase of 24% for its third quarter ending 25th November. After a strong first half of the year, the company is now optimistic that its full-year trading results will be at the top end of market estimates.

A statement released to coincide with the Q3 results said that the company was performing well in the UK market and the recovery in Europe was picking up speed.

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Dr John Philpott, the chief economist at the CIPD, believes that the executive search market will continue to grow because neither the public nor the private sector has the ability to find and retain highly skilled workers.

This news could be good for umbrella company contractors who are searching for their next project. However, not all the news is positive.

Philpott also believes that unemployment will keep on rising until summer 2012, when it will peak at 2.85 million.

The IT sector has seen a decrease in the number of manager and project manager vacancies over the past few months. IT support staff are still in demand, as are web developers and people with experience in SQL, Java and .net.

Alex Farrell, MD of the IT Job Board which published the above findings, said that the decline in project management vacancies showed that companies have cut back on large IT projects that require specific skills. He also remarked that both permanent and temporary vacancies have decreased in the last few months and jobs for contractors now represent 25% of the vacancies advertised.

Prospects for temporary workers are not looking too promising at the moment either. A recent survey carried out by the REC has discovered that two thirds of the agencies that recruit for public sector bodies have seen a 20% drop in placements. This drop was evenly spread amongst support and admin roles and front line staff.

Most agencies expect to see a considerable drop in demand for temps over the next 12 months. The REC will however continue its campaign to promote the benefits a flexible workforce can bring to the country’s economic recovery.

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British consumers are likely to tighten their belts according to Travelex, the foreign exchange specialist.

The company made its prediction after the spate of doom and gloom media headlines that followed last week’s Comprehensive Spending Review.

Mark Bolsom, who is the head of the UK Trading Desk at Travelex Global Business Payments, said it was not surprising that consumers had cut back on spending considering all the negative press we have seen recently.

Sales volumes in the UK had been expected to rise by around 0.4% in September. The reality was rather different as data from the Office of National Statistics actually showed sales volumes dropped by 0.2%. Bolsom said that the data proved that the economic recovery in the UK had already peaked.

The Nationwide Consumer Confidence Index also dropped last month, from 62 points in August to 53. And the spending intentions index fell to its lowest level in nearly 2 years. Larger purchases, such as cars and houses, seem to be among the main items to be put on the back burner.

However, the British Retail Consortium believes that consumer confidence may now begin to rise. A BRC spokesman said that by acting now to reduce the fiscal deficit, the government has provided the country with early certainty. This certainty could lead to consumer confidence increasing as last month’s dip was partly caused by the uncertainty surrounding jobs and services.

The BRC has called on the coalition to remain consistent in its policy making decisions so that enterprises and limited companies get the much-needed predictability that they need to help them bolster the private sector recovery.

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