Micro Firms in London Need a Budget for Enterprise

In advance of this year's Budget, the London Federation of Small Businesses (FSB) has called on the Chancellor to build on measures already announced, maintaining the focus on enterprise and encouraging small businesses' growth - the key to the London's long term economic prosperity.

In advance of this year's Budget, the London Federation of Small Businesses (FSB) has called on the Chancellor to build on measures already announced, maintaining the focus on enterprise and encouraging small businesses' growth - the key to the London's long term economic prosperity. The FSB London Small Business Index (LSBI)Q1, which measures confidence amongst businesses, continued to show signs of a London-led recovery with a score of +26. Although this is down from +46 in Q3, it stood at just +9 in the same quarter a year ago. Confidence is strongest among small businesses in the computer activities sector according to the results from the latest Voice of Small Business survey, with an Index reading of +59. This is up from the score of +21 at the same time a year before, and is the highest reading since the series began. These latest results echo strong readings from the ONS, which show that economic output in the computer programming and consultancy industry rose year on year in November 2013 by 3.3%, compared to the 2.6% seen across all service industries. Highlighting the marked turnaround in the fortunes of the manufacturing sector, business confidence among small manufacturers has grown significantly over the past year, with an Index score of +54, up from -8 in Q1 2013.

An increasing number of small firms in London want to grow and the Budget must create the right environment to meet these aspirations. This should be done through completing reforms in key markets such as banking and energy, making Government support relevant to small firms in the capital through better focused schemes and reforming the tax system to support enterprise. By doing that, small firms will be able to play their part in creating well paying jobs and further encourage the UK's budding enterprise culture. FSB London has welcomed the Employment Allowance and the pledge to cut red tape but says momentum for pro-enterprise policies needs to be maintained to encourage job creation and sustained investment. Decisions around the level of the National Minimum Wage (NMW) will be important: to support emerging confidence and intention to take on additional staff, any changes to the NMW must be based on the decision of the Low Pay Commission. Furthermore, rises must be sensitive to economic conditions and the ability of firms to increase pay, especially those operating in sectors such as hospitality and care. Momentum also needs to be maintained around the reform agenda, notably in the key markets of banking and energy, where more competition and transparency to work properly is needed. In both markets, levels of switching are low and new entrants find it difficult to enter the market. As part of efforts to increase competition and widen choice in the finance market, we are calling on the Chancellor to boost Community Development Finance Institutions (CDFIs). CDFIs can play an important role in providing finance to small firms which are not able to access bank finance. 46% of businesses that applied for credit were refused by their bank (compared to 30% in the last quarter). Access to finance remains a problem for London and UK wide businesses, although funding for lending has made some impact on the 'affordability' side, there are no clear indicators that the 'availability' problem is clearing. FSB London therefore wants to see them have an increased scale and market presence as they do in other countries, notably the USA.

Our research continues to show increased confidence across all sectors and notably in members' investment and employment intentions. Small businesses in London continue to lead the way for business exports. 34% of businesses in London had exported compared to 21% nationally. The number of businesses exporting in London in our Q3 survey stood at 36%. This figure has remained largely consistent over the past two years. With the recovery underway it is important that businesses in London begin to feel the measures already announced are having a positive effect on their business. This is why the Chancellor should look at 'focus and delivery' for initiatives already announced to create long-term growth in the capital. FSB London has welcomed the Government's recent moves to support employment, notably the Employment Allowance and a pledge to cut red tape. The focus now needs to be on addressing fundamental structural issues. Getting more competition and transparency in key sectors such as energy and financial services will greatly help small firms in London.

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