UK's prosperity in 2017 'depends on the success of SMEs'

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Credit: iStock/Warchi

The fortunes of the UK's small and medium-sized enterprises (SMEs) will be critical to the country's overall prosperity this year.

This is the view of the Federation of Small Businesses (FSB), which has urged politicians to pursue measures that make it easy to both set up and run a company.

Mike Cherry, national chairman of the FSB, believes this could be vital to the national economy, as Britain's "prosperity in 2017 will be founded on the success of the small business movement".

"That success rests upon all of us truly creating a new entrepreneurial culture," he commented.

"This means the whole of society - government and business, customers and employees, public and private sectors - all choosing to support smaller businesses and the self-employed."

Mr Cherry pointed out that the number of small business owners and self-employed people now stands at a record high of 5.5 million.

He described these individuals as the "engine of the UK economy", as they employ nearly two-thirds of the private sector workforce.

However, Mr Cherry noted that the rate of growth has started to slow, while confidence levels in the SME sector are on the wane.

"Smaller businesses have been struggling and it makes everyone’s words and deeds important as we head into 2017, where we hope for recovery," he said.

The rising cost of doing business was flagged up as one reason for this drop in confidence over the last year, as measures such as the introduction of the National Living Wage have pushed up labour costs at a time when many SMEs are already dealing with the rollout of workplace pension auto-enrolment.

Furthermore, Mr Cherry noted that the prospect of inflation in the spring, along with a weaker medium-term economic outlook, will place a further squeeze on SMEs that have been hit by rising import, supply and product costs.

He stated that since some smaller firms will not be able to move their headquarters or workforce, or hedge their costs, they will need to "work out how to cope with margins being squeezed even further".

Mr Cherry also flagged up late and poor payment practice from larger firms as another "huge issue" for the SME community.

"We now face a poor payments crisis," he warned.

"If this is not tackled, then every year 50,000 businesses will die, leaving £2.5 billion of GDP missing, purely due to late payments."

Mr Cherry said the FSB will be putting pressure on the government to act on this problem during 2017, so promised reforms are both "toughened up and delivered".

"With 30 per cent of payments typically late and finance directors of large firms squeezing smaller firms to improve their own cashflow, we need to see concrete action and results," he stated.

Mr Cherry went on to state that the prospect of the UK leaving the European Union following last year's vote for Brexit is another concern facing SMEs at the moment.

"Brexit will bring risks and opportunities for our members, and the strategy adopted in the upcoming negotiations must manage down those risks, and accelerate the opportunities it provides," he said.

Mr Cherry added that he is looking forward to the year ahead and ensuring SMEs get the right support to thrive.

"In short, it’s not just Brexit – there is a lot to do, to make this an economy that truly works for everyone, he concluded.