Fall in small business confidence as employment costs take a toll, warns FSB

28 Aug 2024

Small business confidence fell back into negative territory in the second quarter of this year, according to research conducted by the Federation of Small Businesses (FSB).

The FSB's Small Business Index (SBI) for Q2 2024 saw the headline confidence reading tumble to -10.8 points, a fall of 16.3 points from Q1's +5.5 points.

The proportion of small firms saying the cost of running their business was higher than a year ago fell, from 83.7% in Q1 to 80.4% in Q2.

However, in terms of the factors driving that increase in costs, however, labour costs are the most commonly cited, at 52.2%, the highest-ever reading on this measure.

Tina McKenzie, the FSB's Policy Chair, said: 'Small businesses are looking with trepidation at the government's forthcoming plans to change employment, which could both increase risk around small businesses employing people and the costs when they do.

'The rise of labour costs will hold back economic growth, and points to the possibility of a contraction in small business job numbers, which would be terrible news for firms, for staff, for local communities and the national economy.

'Taxes and employment costs are already soaring for small employers. The government should formally index the Employment Allowance to the rising living wage to help alleviate pressure on small firms and resolve the economic inactivity crisis. Every line in the government's employment plans must be checked for negative impact on growth and jobs.'