Government urged to prioritise tax relief as small business confidence hits post-Covid low

17 February 2025, 07:14

At the Federation of Small Businesses (FSB), we take a regular temperature check of UK small firms’ confidence levels through our Small Business Index – and what we found in the last three months of 2024 wasn’t encouraging.

At -65 points (using a scale where “much improved” and “much worse” responses are given double weighting), the reading of small business optimism reached its lowest point in the post-Covid era.

Even with GDP growing in December, small firms are bracing for a rough ride in the early months of 2025, with the domestic economy topping the list of factors small business owners think will limit their growth ambitions.

Anyone can see from news headlines that the world is rapidly changing, with everything from AI to geopolitics in flux.

Amidst this uncertainty, the Government’s push for growth is urgently needed, and must be stuck to no matter what obstacles and crises are thrown into its path.

Small firms will be the engine of economic growth, if given the right conditions. They are after all the ones with the greatest potential to expand, to go from start-up to scale-up, moving nimbly into new niches and providing the products and services of the future.

As well as getting spades in the ground as soon as possible for big infrastructure projects – and ensuring that small firms get their fair share of the procurement pie – the Government must show that its support for small firms is more than hot air.

The Government must prioritise spending on programmes in the Spending Review that will deliver small business growth, as they will more than pay for themselves.

The King’s Speech later this year should include a Small Business Bill, to bring together the different strands of support and reform needed.

There’s threats as well as opportunities. The upcoming Employment Rights Bill is a big worry for small firms, over nine in ten of whom say they’re concerned about it, and about what it will mean for their ability to maintain or increase their staff numbers.

The Government must adapt these plans, especially on the issue of taking an employer to tribunal on day one.

Small business confidence can be turned around, with the right policies and support.

Getting animal spirits to roar back will help us as a country get back on track to achieving robust and sustainable economic growth.

• Tina McKenzie is the Policy Chair of the Federation of Small Businesses (FSB)

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