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SMEs would expand if NI were cut

Nia Williams

June 7, 2011

Small businesses continue to be stifled by challenges that affected them during the recession, including late payments from other firms and a lack of finance from the banks, which forced many small firms to close.

Despite tentative economic growth, many small firms say these issues continue to prevent them from taking on staff. While FSB members have said they are supportive of the Government’s plans to cut the deficit, policies such as cutting NICs have to be at the heart of plans for growth.

The FSB’s ‘Voice of Small Business’ survey, with more than 1,700 respondents, showed that insufficient work and uncertainty over contracts (37%), the state of the economy (33%), cashflow (31%) and access to finance as well as the cost of credit (16%) are preventing them from employing.

With 2.46 million people out of work, the FSB believes that it is crucial that the Government provides incentives to help small businesses to take on staff and tackle unemployment.

According to the survey, ensuring invoices are paid within 20 days would encourage 17% of small businesses to take on staff.

Most significantly, nearly a third (31%) of respondents said that reducing NICs payments for the first six months of employment would encourage them to take on more staff, and 11% said extending the NICs holiday scheme would be an incentive.

The Government introduced a NICs holiday for start-ups that take on up to 10 employees in 2010, but the FSB believes this does not go far enough. The FSB is urging the Government to extend the NICs holiday to existing firms with up to four members of staff that take on up to three new employees.

The FSB is also calling on the Government to help small businesses employ more apprentices and interns: 29% of respondents said increased support would encourage them to take these on.

John Walker, national chairman, Federation of Small Businesses, said: “We have been saying for some time that small businesses would be encouraged to take on staff if National Insurance Contributions were reduced. Small businesses want to employ but have told us that they need incentives to do so.

“The Government must extend the National Insurance Contributions holiday to existing businesses if small firms are to take on new staff and so help tackle high unemployment.

“Throughout the recession, we all heard the struggles small firms faced as many had to shut up shop because they were being paid late, and couldn’t access finance from the banks, leaving their cashflow in a volatile position.

“While our members have told us the situation has improved slightly, these same issues are now preventing small firms from taking on staff – crucial if the country’s small firms are going to help to secure and promote recovery.

“It is not only imperative that the Government creates an environment for job creation, but that the banks lend to small firms and businesses are paid on time, to give small firms the confidence they need to grow their business and employ.”


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