The FPB has warned small firms that they will face a number of challenges over the next few years.
Spokesman Phil McCabe pointed out that small firms traditionally suffer more when a country starts recovering from a recession rather than during the actual economic crisis.
At the moment, credit is severely restricted as a result of the crisis and the growth finance necessary to hire more staff and get better contracts is at a premium.
This scenario is likely to remain with us over the next few years, although this is largely dependent on what moves the government takes to stimulate growth in the private sector after the public sector spending cuts.
Bank lending to SMEs has dropped by 4.5% this year, according to a survey by the CEBR. Many SMEs and umbrella company contractors have been put off asking their bank for finance due to the high cost of borrowing. Costs are likely to increase further in 2011 as new EC banking legislation will require banks to raise their capital cover ratios.
The CEBR survey also showed that business confidence has fallen this year among companies will less than 250 staff. These firms generate annual revenue of over £1.6 trillion compared to the £1.4 trillion of revenue accounted for by FTSE 100 companies. SMEs also contribute 53% of the total business tax revenue.
The CEBR has called on the government to reduce the corporate tax rate for small businesses below 20%.
© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.
Image: Climate Challenge by Oxfam International
