Business Briefing: April’s GDP growth offers a measure of hope to small firms amid difficult conditions

Business / Wed 14th Jun 2023 at 07:32am

RESPONDING to Office for National Statistics figures showing that GDP rose by 0.2% in April 2023 compared with the previous month, and rose by 0.1% in the three months to April, Ann Scott, Development Manager (Essex) at the Federation of Small Businesses (FSB), said: “GDP growth in April comes after a tough winter, and will bring some measure of hope to small firms.

“This slight increase was driven by services, up 0.3% in the month, although consumer-facing services in particular remain 8.7% below pre-pandemic output.

“The three-month picture, meanwhile, doesn’t offer much to shout about, only just lifting above zero – although growth of any kind is of course good news.

“Our Small Business Index measured a big uptick in confidence among small firms between the last quarter of 2022 and the first quarter of this year, ending up in lightly negative territory, and we hope this momentum will continue.

“Most small business owners will tell you, however, that it’s far from plain sailing for them at the moment, despite the resilience they’ve shown to date.

“Yesterday’s labour market figures show that wages are rising at a record rate outside pandemic conditions, which makes a base rate rise next week more likely, and will make finance even harder to come by for many small firms looking to invest. This will hold back our recovery, when it is small firms we should be looking to as the way out of the economic doldrums.

“If the Government wants to give small firms a lift, one revenue-neutral measure which would have an immediate effect would be to tackle late payment, to get funds flowing through supply chains.

“Making large corporates publicly responsible for the payment practices in their supply chains would give immediate relief to millions of small firms, and save them time and effort currently spent chasing invoices, improving their productivity.

“Inflation fell in the most recent figures, but is still some distance higher than the 2% target, while elevated prices are proving sticky. With consumer confidence rising but still firmly negative, many small firms are in a precarious position.

“Cutting their fixed costs – by looking at business rates, increasing the VAT threshold, and ensuring that small businesses trapped on high energy tariffs can ‘blend and extend’ their contracts – will relieve margin pressure, and encourage small firms to fulfil their true potential as the engine of recovery.”

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