With the Coalition Government having not ruled out a rise in the VAT rate in the Emergency Budget on 22 June, the FSB is urging the Government to be mindful of how the tax will affect real businesses.

If the Government does decide to increase VAT, the FSB urges that it must ensure that small businesses are given time to prepare, as moves by the previous Government to reduce the VAT rate for a limited period cost small firms £1,500 in administration alone.

The FSB is calling for a time limit to be set on the increase, providing certainty for the small business community and allowing them time to plan for the eventual reduction.

John Walker, National Chairman, Federation of Small Businesses, said:

“Small businesses do not have the financial buffers to absorb increases in VAT as big business does, so it is imperative they are given time to plan. If the Government truly is a low-tax administration, it must include a sunset clause which would put a time limit of the length of time VAT is increased.

As the Digital Economy Bill is debated in the Lords next week, figures from the FSB-ICM survey of 1,300 small firms shows that a quarter (24%) of respondents are dissatisfied with their broadband service.

Of those small firms that are dissatisfied, six in 10 (63%) said they are unhappy with the speed and reliability of their internet connection supplied by their service provider.

Another 30 per cent said the area they live in has an unreliable broadband connection and 13 per cent said they would consider moving business premises to an area with faster broadband.

The FSB is concerned that small firms are being promised a service from their broadband supplier which is not being delivered. The Government must ensure that good broadband infrastructure is put in place to ensure small firms and consumers get the broadband service they expect.

As the Digital Economy Bill is debated in the House of Lords, the FSB is urging the Government to ensure that the needs of small businesses and consumers are kept at the forefront of the debate and is calling for:

• Internet service providers to be obliged to deliver a minimum and guaranteed connection speed of 8Mb/s direct to business premises

• The telecommunications ombudsman’s remit to cover all service providers and their contractors

• Ofcom to act truly independently of the industry in order to really ensure that small firms are getting a good deal.

The conference, from 18–20 March at the Aberdeen Exhibition and Conference Centre, will see an all-party line-up ready to answer questions from small businesses on anything from the impact of the impact of recession to the measures they’ll take to support small businesses.

As the country prepares to go to the polls and small businesses look at how they can support further economic recovery, ex-Strictly Come Dancing star, John Sergeant will tango with the all-party line-up featuring Anne Begg MP (LAB), Derek Brownlee MSP (CON), Sir Robert Smith MP (LIB), Jim Mather MSP (SNP) and the FSB’s UK Policy Chairman, John Walker.

Over 750 delegates will have the chance to ask questions of the panel and join the debate.

John Wright, National Chairman, Federation of Small Businesses, said:

“The year ahead will still be difficult for small firms which are doing all they can to get themselves and the economy back to recovery. As the country gets ready to go to the polls, small businesses will be looking to an incoming Government – of whatever hue – to support this. This debate will be a prime opportunity for all the parties to get the small business community behind them.

“Small businesses will be key to the recovery. They provide vital revenue and employment to the UK economy and will be the job creators in years to come. It is therefore crucial that policy makers hear their views loud and clear. The FSB annual conference provides the ideal setting to do this and to underline just what small businesses can do with the right support.”

That is the question businesses from across the country will debate when this controversial issues comes before the Federation of Small Businesses’ (FSB) annual conference (18–20 March, Aberdeen Exhibition and Conference Centre).

Pre-packaged administrations – which allow practitioners to put a company into administration, eliminate their debts and then allow it to be quickly sold on, often to people closely associated with the business – have been a feature of the current downturn.

Big names such as USC, Whittards of Chelsea and Cobra Beer have all used ‘pre-packs’ during the last 18 months. When this happens, small unsecured creditors can become victims of bad debt – while the business in trouble appears to escape without sanctions.

Concerns have been raised publicly that pre-packaged deals offer companies an easy way to walk away from their debts and leave their small suppliers high and dry. However, others contend it is a vital way of insulating and savings profitable elements of otherwise failing businesses and that pre-packs offer a better option than the alternatives.

John Walker, FSB’s UK Policy Chairman, said:

“Many FSB members have been concerned about the effect of pre-packs on local businesses and by proxy, the local community.

“While saving jobs should remain a priority, questions about the effects of pre-packs on trade-credit insurance availability, inter-business trust and jobs in the wider economy need to be addressed.”

In his Entrepreneurs Manifesto and Declaration of Rights released last week, the former Dragons’ Den investor and founder of the School for Startups said that people were being deterred from starting in business due to excessive red tape, and that the Government’s Simplification programme was failing.

However, Stephen Alambritis, the FSB’s head of public affairs, said that the Government had made it easier for people to set up a business.

“They have simplified the obstacles people face setting up a business, but if you want to grow the business, for example, by moving from self-employed to employer status – then it can be more difficult.”

Alambritis also agreed with a Government statement that people can set up a business in the UK in less than a day.

“We have one of the easiest regimes in the world for setting up a business, but it is the ongoing regulations that are a burden.” He said.

Following weeks of bad weather which is estimated to have cost the UK economy at least £600m a day, with staff in some areas of the country unable to make it into work, the FSB wants to see discussion between local authorities, transport and salt mining companies, schools and the business community, among others, to find solutions to deal with adverse weather.

In a new policy paper on business continuity, entitled Let’s Keep Britain Moving, the FSB states that many small businesses were forced to close, lost business, or saw supplies dwindle because of the snow, with many roads left completely impassable. School closures also meant many parents had to stay at home to look after children, thereby missing further days at work.

The FSB argues the authorities did not learn from the lessons of last February’s snowfall quickly enough and could have prepared better for the recent spate of bad weather.

The FSB is calling for more support for the country’s 4.8m small businesses, which are among the hardest-hit by increasingly erratic weather conditions and other emergencies, because they find it harder to put contingency plans in place and are more vulnerable to road closures and transport disruption in remote rural areas.

John Wright, National Chairman of the Federation of Small Businesses, said:

“Small businesses have been particularly hard-hit during the recent bad weather, with staff unable to make it to work because of school closures and snow-bound roads. We need to be better prepared with more salt stocks for roads and better guidance for head teachers on when to close schools, to prevent staff from missing days of work and bringing the country – and the economy – to a standstill.

“Small businesses have shown how resilient and resourceful they are by trying to put in place plans for flexible working and by allowing staff to work from home. It is the small businesses that come to the aid of local communities in difficult times.

“However, following recent events, it is time we had a national civil contingencies conference, bringing together all relevant parties, and including the business perspective, on emergencies such as these. It is time the economy stopped coming to a halt during these emergencies, and we all pulled together to find ways to Keep Britain Moving.”

As the country goes to the polls next year, unemployment and public debt will still be high. An incoming government – of whatever hue – will be placed in an awkward position; it will be forced to make some tough decisions to steer a steady course through very choppy waters of recession and then into recovery.

Once again, small businesses will be at the heart in restoring the UK into recovery. They can only do this if they are allowed to get on with business as usual. Britain’s five million small businesses will have their plans in place to grow and to flourish, many of these plans will be fragile but important nevertheless.

An incoming government must make sure it nurtures these fragile plans, creating the right conditions for entrepreneurs to thrive by enabling them to guide the economy into a period of steady and credible growth.

One of the most important things that must be done in the coming year is for banks to return to their normal lending criteria, and to start playing their role as lenders with a large dose of modesty. The FSB has long been calling for more competition in the banking sector and will welcome a new year which sees more finance options made available to small firms. This should include non-UK retail banks.

John Wright Another option would be the encouragement of council-run banks, following the Bank of Essex model. By turning Post Offices into Post Banks we not only save our valuable Post Office network, but we also provide a further source of funding for small firms.

Regional Development Agencies should be turned into regional finance houses, using funding from the European Investment Bank and pushing the Enterprise Finance Guarantee and regional venture funds.

Until the 1970s, regional stock exchanges existed in places such as Bristol, Cardiff, Sheffield, Halifax and Swansea. At their height there were 22 regional stock exchanges in the UK. The London Stock Exchange must not continue to monopolise equity finance in 2010. We need regional stock exchanges back and many of them, as soon as possible.

One way out of recession and into recovery in 2010 for many small firms is through exporting goods and services. Exporting can overcome the hardship of recession. Exporters however, need a helping hand from the Government.

The Government should also make it easier for budding entrepreneurs to set up in business by introducing measures such as an Enterprise Allowance Scheme which would provide a small income for those wanting to go it alone in 2010.

Employment is another key issue for the coming year. Unemployment levels are still going to be high, and small businesses are absolutely crucial to fighting this trend as they are the country’s main employers, with more than half of the private sector workforce employed in small firms.

To ensure small and medium sized enterprises create the jobs needed we must reform JobCentre Plus, to include a dedicated business manager in every job centre, to focus on the needs of small and medium-sized businesses, and to reconnect jobseekers with the country’s job providers.

2010 must see systems put in place to connect small businesses with school leavers, graduates and those seeking work. Apprenticeships must be simplified and their existence promoted. Group apprenticeships programmes must be the norm throughout the UK. The agreed moves towards graduate internships in the new year must and can succeed.

2010 must see the route to recovery. Small businesses deserve a big vote of confidence and the sector in turn will return the compliment with jobs, guaranteeing a sustainable recovery. 2010 may be a general election year, but for small firms it will be business as usual as they strive to complete the route from recession and back into recovery.

The FSB-ICM ‘Voice of Small Business’ Annual Survey 2009 reveals that 53 per cent of businesses introduced new or improved products and services last year, and 51 per cent intend to continue innovating next year, showing that small businesses are keen to grow and develop, despite the tough times.

The survey indicates more good news from the small business sector: 27 per cent of the 10,000 respondents said their profitability increased over the last year and 30 per cent said their sales volume had increased over the last financial year.

However, a third of respondents who have borrowed finance in the last year reported that they had been charged more, the vast majority saying their rates increased by more than one percentage point. Half also said they had not taken out any loans at all in the last 12 months, which could be a sign that they were put off by the prohibitive cost of finance.

Three in 10 small businesses surveyed said a cut in employers’ National Insurance would improve their economic prospects in the recession, while another three in 10 businesses said if banks were to lend more, or more fairly, that would be key to improving their prospects.

The FSB is calling the Government to put in place a renewed stimulus package of specific and targeted measures to get the economy going again, nurturing the small business sector’s tentative growth.

John Wright, National Chairman of the Federation of Small Businesses, said:

“As the UK goes to the polls next year, public debt and unemployment will still be high, and the Government will have to make tough decisions to encourage recovery.

“The FSB is calling for a renewed economic stimulus to help small businesses continue to create jobs, get access to crucial finance, innovate and start up new businesses, to get us squarely on the road to recovery.”

In a survey of over 1,200 small businesses, nearly half (46 per cent) estimate the postal strikes could cost them between £500 and £5,000. In the run up to Christmas, one of the most crucial times of year for a small business owner, four out of ten said that they could lose trade (42 per cent) and 40 per cent said that their business reputation could be damaged.

Half of small firms are considering leaving Royal Mail but feel they are held to ransom because alternative carriers are too expensive and do not meet their needs. The FSB is urging Royal Mail management and the Communications Workers Union to reach an agreement as soon as possible so small firms can get back to business.

John Wright, Federation of Small Businesses National Chairman, said:

“National postal strikes have a devastating impact on already struggling small businesses. The wildcat strikes across the regions have already cost small firms dearly, with many predicting the cost to their business reaching several hundred pounds, but these national strikes are having a much more damaging impact.

“FSB research shows that more than half of small firms rely on Royal Mail to send over 80 per cent of their business post, and 40 per cent are concerned about the loss of trade and the loss to their reputation these strikes will cause. Almost half said they could lose anywhere between £500 and £5,000 over the course of the national strike action, which comes at one of the most important times of the year for any small business owner – Christmas time.

“Small firms rely on the Royal Mail to send their business post but they are caught in a classic Catch-22 situation with many considering deserting Royal Mail because the service is unreliable, but at the same time are unable to afford alternative carriers. The FSB is urging both sides to come to an agreement immediately.”

Conference delegates will have the chance to win a tin of jelly babies at the FSB’s exhibition stand in the Bournemouth International Centre, by completing a ‘Big Small Biz Quiz’ on the importance of small businesses – the country’s big employers.

The FSB is calling for more support for small firms to increase their average workforce from four to six employees, and is illustrating this with a tin of six jelly babies at its stand which is in the form of an employment centre in the exhibition hall.

Liberal Democrat Shadow Chancellor Vince Cable will also be speaking at an FSB fringe event titled Small Businesses: The Job Creators … Economic Drivers, which will present ideas to help small firms recruit and retain staff.

The FSB will be issuing a new report at the conference, entitled Small Businesses, Big Employers, which calls for:

• Reform of Job Centre Plus by linking it with Business Link and skills boards to provide a better focus on business needs;

• Creation of quality apprenticeships without the administrative burden these create for small businesses;

• Support for more graduate internships to be set up in small businesses;

• An Enterprise Allowance Scheme to help the unemployed go into self employment;

• A Short -Time Working subsidy to help businesses train staff to get them ready for the upturn and to protect existing jobs; and

• A two year moratorium on business regulation to help the economy recover and let business owners concentrate on survival.

John Wright, National Chairman, Federation of Small Businesses, said:

“With unemployment at a 14-year high and job vacancies at an all-time low, urgent action is needed to avoid a social and economic slump, and small businesses hold the key to reversing this alarming trend.

“Small businesses employ over half the private sector workforce and despite the recession we have found that 57 per cent would like to take on staff in the future if they were given the support they need to do so. This would create 800,000 new jobs and would really go some way to tackling unemployment.

“Our proposals will help make it easier for small businesses to recruit, retain and train their staff and play their part in stimulating economic recovery.”