New research shows
Confidence among London small firms has risen to the highest level in over a year despite spiralling business costs, according to the latest Federation of Small Businesses (FSB) London Small Business Index (LSBI).
The LSBI stands at 24 in Q1 2017, the highest figure since Q4 2015, and up considerably from the -3.4 recorded after the EU referendum.
The recovery in the headline SBI comes despite a surge in the cost of doing business.62 per cent of businesses have seen an overall increase in the cost of running their business operations in the past quarter compared to 2% who have seen a decrease. The main causes of these business costs include Labour costs, the exchange rate, regulation, utility costs and inputs into the business.
Positively, nearly a half of businesses (48%) expect gross profits to increase in the coming three months, compared to a fifth (20%) who expect gross profits to fall.
The average FSB employer will face £2,600 in additional employment costs over the coming year as a result of the rise in the National Living Wage, resulting National Insurance contributions and auto-enrolment. These cost pressures are being exacerbated by rising inflation. The Consumer Price Index (CPI) rose above the Bank of England’s 2% target to 2.3% in March. Firms are struggling with increased prices when buying supplies, products and services, but the rise in inflation will also impact other bills, such as business rates.
Sue Terpilowski OBE, London Policy Chair OBE, Federation of Small Businesses, said: “We are pleased to see members are remaining stoic in the face of economic uncertainty in the capital. The expected increases in gross profits in the coming months is great news, however, we need to realise that the hard costs of operating a business in the capital have started to outweigh the benefits which simply does not make economic sense. We cannot continue to tax small firms in the capital to a tipping point that makes it difficult to grow further.
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