Small businesses – a vital artery of the UK supply chain – saw their confidence go into negative territory for the first time in four years in the third quarter of last year.
But then came a divergence, says Mike Cherry, national chairman of the Federation of Small Businesses (FSB), with confidence in the UK-wide sector back in positive territory (+8.5) in the final three months of 2016 but Scottish confidence pretty threadbare (-29 per cent).
The rise in National Insurance contributions for many self-employed people is very disappointingMike Cherry
Cherry believes that the knock-on effects of the North Sea oil and gas downturn are a key factor. “With the issues around the energy industry up there it is no surprise,” he says.
Many – including Chancellor Philip Hammond in last week’s Budget – have commented on the resilience of the UK economy since the Brexit vote. But, while not disputing that, Cherry does not have rose-tinted glasses.
He says his members on both sides of the Border have faced something of a “perfect crash”: the controversial business rates revaluation, the national living wage, pension auto-enrolment, and rising input prices after the collapse in the value of sterling following that Brexit vote.
On the subject of Brexit, the FSB chairman dismisses the myth that small businesses are not really fussed on the UK’s exit from the EU because the bulk of their trade is within these shores. “Twenty per cent of our members export, 30 per cent export or import and 20 per cent are actively looking to export,” he says.
The FSB’s position on the Brexit negotiations is nuanced, with Cherry alluding to an alternative Global Britain – “whatever that might be” – in saying “there are great opportunities out there”, but that his members also want as much access as possible to a European Union market of 500 million consumers.
Small businesses also have a strong interest in how the immigration issue pans out, with Theresa May saying that she wants to regain control of our borders. Cherry says: “Many small businesses already employ immigrants from the EU and non-EU. They would find it very challenging indeed if that labour force was not still available. Agriculture and hospitals also depend heavily on immigrant labour.”
However, overall he is phlegmatic about the ramifications for small businesses of any outcome. “They are resilient, they don’t overly look at speculation. They deal with what they are facing in the here and now,” he says.
Cherry, who has been an FSB member for 20 years, says sterling’s 18 per cent slump against the dollar and 12 per cent slide against the euro is disturbing that resilient equilibrium, however. “Small businesses import goods and services and it is feeding through into cost increases,” he says.
On the lightning rod issue of business rates, Hammond moved in his Budget to address small business anger in England and Wales with a £435 million package of business tax relief. This included a £50-a-month cap on raised charges for businesses coming out of rate relief, and follows transitional emollient action by the Scottish Government.
Cherry says: “The announcement to help those facing the biggest increases is very welcome, although I suppose it’s still only a sticking plaster on a completely outdated and fundamentally unfair system.
“What was significantly less welcome in the Budget was the announcement of a tax grab on the modest-income self-employed – the hairdressers, plumbers, builders and all sorts of entrepreneurs who are the engine of growth and innovation in the UK’s economy. The rise in National Insurance contributions for many self-employed people is very disappointing.”
In the wider picture, the FSB is not worried that the Prime Minister’s apparently more Whitehall-interventionist Industrial Strategy announced recently will focus disproportionately on big companies and picking winners, the chairman says.
“I don’t think we will be overlooked,” he adds. “We have a great role to be played in the supply chain. Those firms should be championed. You don’t just look to prime contenders like the automotive or aerospace industries. If you get it right for small business you get it right for the needs of big business. Think small first.”
He is even-handed on the pivotal issue of small business funding. Cherry says his members use the challengers, peer-to-peer lending, equity and mezzanine lending – “but they are not using them as much as they should be”.
However, Cherry says that while “it’s a challenge for regulators not to impose too much regulation on the challengers in terms of the capital they have to hold, we don’t want to be going back to the 2008 financial crisis. Small businesses were very badly affected, not being able to get finance and having overdrafts curtailed. It stopped almost at a moment’s notice”.
Educated: Private, but left at 16 to do three-year Institute of Wood Science exams
First job: Joined the family timber business in 1970 to “learn the ropes”
Best piece of business advice given to you? “Your word is your bond”
Kindle or book? Book, but a Kindle is useful if I’m away
Favourite holiday destination? Corsica – it’s not called “Isle de Beaute” for nothing
What couldn’t you do without? My family as they support everything I am fortunate enough to do
What makes you angry? Unfairness; late payment
Best thing about your job? Helping others, and to be in a position to allow my passion for small businesses to help policymakers understand the issues