The Federation of Small Businesses (FSB) has written to the Chancellor ahead of the Emergency Budget on 22 June, urging the Coalition Government to ‘think small first’.

It has urged the Chancellor to temper any spending cuts and tax rises with measures that will inspire confidence in the future and allow businesses to innovate, grow and employ.

For example, the move to reduce VAT to 15 per cent in 2008 cost the average small business £1,500 in administration alone. The FSB has urged the Government to include a sunset clause which would allow small firms to plan for the eventual reduction and send a strong message that while tax increases are necessary in the current climate, that this Government is a low tax administration.

The FSB also opposes any major increase in the Capital Gains Tax (CGT) for businesses and entrepreneurs as it would stifle long-term investment in small firms. The FSB believes that CGT on business activity should remain at 18 per cent and a generous taper relief be reintroduced to help savers and long-term investors.

A fifth of small firms believe that National Insurance Contributions (NICs) and PAYE taxes are their biggest obstacle to growth. Given this, the FSB argues that while it is important that the Government cuts the deficit, something that over 90 per cent of FSB members agree with, it must not be at the expense of the recovery or mean a hike in taxes for small businesses.

John Walker, national chairman at the FSB, said: “While the FSB does not want to see taxes increased we understand that reducing the budget deficit is a key priority. The Chancellor must use the Budget to set out his pro-business credentials and offer something to stimulate growth. Private sector growth is the best method of cutting the deficit, keeping taxes low and absorbing the staff that will lose jobs in this round of budget cuts.

“It is imperative that any changes to Capital Gains Tax or VAT go hand-in-hand with an ambitious plan for helping economic growth through allowing small firms to employ, grow, invest and innovate.

“Proposals to give new firms a National Insurance holiday do not go far enough and will not help those businesses who have been running for a couple of years and want to expand by taking on staff. By cutting employers NICs payments for established companies that want to take on staff, the Government would benefit from the creation of new jobs and the additional revenue from income tax and employees NICs contributions that would be paid, while freeing up business cash-flow enabling it to grow.

“With the four main high street banks holding 83 per cent of the SME market, there needs to be more competition for credit. This will help drive down the price of credit which we believe is putting businesses off applying for finance.

“We look forward to the Budget on 22 June and hope that the Chancellor uses this opportunity to ‘think small first’.”

Construction workloads turned positive for the first time in two years, says the latest RICS survey of the industry.

Five per cent more chartered surveyors reported rising rather than falling workloads for the first quarter of 2010. This compares with a net balance of 12 per cent reporting falls in Q4 2009. This positive turnaround reverses a decline which has stretched for seven consecutive quarters and is the first time that the net balance has turned positive since the first quarter of 2008 when it was one per cent.

However, this improvement masks considerable sector variation with some surveyors reporting concerns over a lack of finance for development. The private commercial workloads net balance increased from -11 to +17 and both private housing and public housing workloads moved back into positive territory, albeit only very modestly. However, surveyors in the private industrial and infrastructure sectors reported falling workloads at -9 and -4 respectively.

There was also significant variation in performance at a regional level. Surveyors in London and the South East reported a sharp turnaround in workloads, with the net balance swinging from -15 to +21. A slightly less dramatic shift in sentiment took place in the Midlands and East Anglia, where the net balance jumped from -9 to +10 but in the North and Scotland, the net balances remained in negative territory at -7 and -6 respectively. In Northern Ireland, surveyors reported continued sharp falls in workloads, with the net balance deteriorating from -37 to -59.

Looking forward over the next 12 months, expectations for workloads are stable with the net balance increasing from two per cent to four per cent. However, expectations for employment and profits are fairly downbeat with surveyors expecting both further job losses and a contraction in margins.

Commenting Simon Rubinsohn, RICS chief economist said: “The construction sector seems to be finally lifting its head above the recession parapet but the continuing lack of development finance remains a major obstacle to a sustainable recovery with surveyors still pessimistic about future prospects. Concerns over likely cuts in public sector capital spending programmes is another factor contributing towards the cautious stance of respondents to the survey.”

Confidence amongst British businesses slipped back last month, according to the latest Lloyds TSB Corporate Markets Business Barometer.

The survey – a monthly snapshot of company views on the outlook for the economy – shows that optimism amongst UK businesses fell from the 27 month high reached in March. It shows that just under half of UK businesses (49 per cent) expect business activity to rise over the coming year, while less than one in ten (seven per cent) believe trading will slow. The resulting balance of +42 represents a slight fall from the high of +49 reached in the previous survey.

Despite this slight dip in confidence, business optimism remains above the Barometer’s long term average – an indication that medium term growth prospects are still positive.

There are also signs that companies now have brighter hopes for the wider economy. The total balance of firms saying they are more optimistic than they were three months ago rose four points to 47 per cent. Two thirds (64 per cent) of businesses say they are more optimistic, while a fifth (17 per cent) are less so.

Once again, there were differences across the sectors. Industrial firms were on the whole more upbeat about prospects for the coming year – a balance of 47 per cent said they expected business activity to increase in the next 12 months, which is a two-point rise on last month. By comparison services and distribution firms are less hopeful. The balances for businesses in these sectors fell 14 points and eight points respectively.

The regional picture is also varied. Businesses in the North and South both reported a decline in expectations for business activity over the coming year (down four points and 16 points respectively), while in the Midlands the confidence balance edged up three points to 37 per cent. However, when asked about their views on the wider economy, Midlands firms reported they were less hopeful than three months ago – the balance slipped seven points to 36 per cent. Companies in the other regions, on the other hand, were more optimistic – balances rose 10 per cent in the North and eight per cent in the South.

Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: “Although business confidence appears to have come off the boil this month, we need to be careful about interpreting the results.

“Expectations for improvements in business activity may have slipped, but they are still comfortably in line with the long term average – and that’s a good indication that long term growth prospects remain positive.

“We’re also seeing some signs that businesses are more hopeful about the general economy. The Barometer’s measure of business confidence compared to the previous three months is a reliable leading indicator of shorter term economic activity and it too is on the rise.”

In a sign of renewed confidence among Europe’s entrepreneurs, almost one in three (30 per cent) small businesses are set for expansion in 2010 – with two thirds (63 per cent) of those planning to go for growth during the second half of the year – according to new research.

The second ‘DNA of an Entrepreneur’ study* carried out by specialist insurer Hiscox among nearly 1,000 small business owners in the UK, Germany, France and the Netherlands, also found that three in five (58 per cent) of those polled are optimistic about the year ahead.

With the recession now officially at an end, over half (53 per cent) of those questioned believe 2010 is a good year to start up a small business with nearly a fifth (19 per cent) pinpointing gaps in the market caused by company closures as a key opportunity to capitalise in the economic upturn.

Lack of support

But despite growing optimism, one in five (20 per cent) SME bosses are concerned that there is not enough support for emerging small businesses. In fact, the majority (65 per cent) believe that government bureaucracy is threatening their country’s entrepreneurial sprit, identifying four major barriers to setting up on your own:

· Unfavourable taxation system (71 per cent)

· Inflexible labour laws (63 per cent)

· Burden of benefits and social security payments (58 per cent)

· Lack of support from government (37 per cent).

However, when it comes to nurturing future business talent the UK topped the poll – a third (31 per cent) of UK SMEs say our education system encourages individual ideas and dreams, compared to just 19 per cent in Germany.

Risky business

The study also found the recession impacting entrepreneurs’ attitude to risk – just one in three (36 per cent) small business owners say they are comfortable with taking risks compared to 40 per cent at the time of the last study two years ago**.

Figures also point to a glaring disparity between countries when it comes to new ventures. Less than one in ten (8 per cent) bosses in Germany accept the need to take a gamble when running their business compared to 38 per cent in France and 29 per cent in the Netherlands and the UK.

As the most risk averse of Europe’s SME bosses, over a third (37 per cent) of those polled in Germany admitted they would prefer to run their business without having to take any chances. In contrast, just 11 per cent from France and 15 per cent from the Netherlands and the UK said the same.

Alan Thomas, small business expert at Hiscox comments: “The SME sector is a strong bellwether for the rest of the economy so it’s a great sign that Europe’s entrepreneurs believe they are now in a sound financial position and well placed for growth in the second half of 2010, despite being more risk averse.

“But small businesses cannot lead the charge alone. The tough economic climate of the last two years has left many in a delicate position so it’s vital that the right support is provided to breakdown any barriers threatening Europe’s future entrepreneurial success.”

Bad things happen. It’s a fact of life. But with a little preparation, businesses can mitigate some of the impact.

There are some estimates that 80 per cent of businesses with no business continuity plan fold in the aftermath of a major disaster. And while this could be something along the lines of a national emergency such as a terrorist attack or health epidemic, it could just as easily be something closer to home, for example the incapacity of a key member of the business. Or it could be something as simple – yet damaging – as a strike leaving you out of contact with your customers.

Putting a plan in place can not only help you arrange procedures for dealing with emergencies; it also provides a step-by-step guide for individuals to follow when they may be finding it difficult to make decisions – giving them a route to follow will help them work through the crisis.

“By developing a simple plan, a business continuity plan, you can protect your business to ensure that no matter what disaster strikes you are prepared and “Business as usual” is the only thing your customers and suppliers see,” says Colin Ive from SME Continuity.

Your first step, according to the Contingency Planning and Disaster Recovery Guide, is to prepare a list of all the potentially serious events that could happen. This doesn’t necessarily mean listing all the disasters that could befall you, but looking at the issues that would affect your business. So instead of listing swine flu, ebola or any other illness, the list would include something along the lines of staff shortages or key person unavailability.

For each potential issue, you need to come up with a process to follow – the key people involved, any suppliers that need to be contacted, a list of contractors who may be able to support you and, vitally, any insurance policies you can claim on.

While business insurance won’t be able to completely prevent any effects of a disaster, it can help to mitigate any costs you may incur. Key Man Insurance can provide a cash injection into a business in the event of the untimely death or incapacity of a specified member of staff. The funds can be used to offset any loss of revenue caused by that person’s absence, or to recruit or train a new person in that position.
If your business is hit hard, and has to stop trading for a short period, Business Interruption insurance can help to tide you over. It’s a short term solution for a few weeks and is there specifically for if you have to stop trading due to factors outside your control – it doesn’t cover a downturn in trading conditions.

If the emergency is a bit closer to home, public liability insurance and employers’ liability insurance will protect you from claims for issues that arise on your premises. We live in a culture of litigation and if an injury or damage could be found to be your responsibility, then expect a hefty bill.