Government action to stimulate the economy is not working, the Federation of Small Businesses (FSB) has warned, after a member survey found that recent VAT cuts, bank lending guarantees and pledges on payment practices have had no impact.
The FSB poll of more than 4,000 small businesses showed that over half have seen their trade decrease in the last two months – despite a cut of 2.5% in VAT last November; the introduction of the Government backed Enterprise Finance Guarantee in January; and calls for the public and private sector to settle their invoices more quickly.
Only 8% of small businesses said their banks were making the Enterprise Finance Guarantee available to them. Meanwhile over half (53%) of those polled said they doubted that the Government scheme would actually compel the banks to start lending again.
Additionally, a fifth of small businesses are still waiting for longer than 10 days to be paid for public sector work, even though the Government pledged that it would work with the wider public sector to speed up payment times.
The figures also show that small businesses are increasingly being used as a source of credit in the commercial world with over a third (36%) waiting longer to get paid for private sector work. This comes despite the Government-backed Prompt Payment Code, launched last November, which called for fairer payment practices between large and small businesses.
In a separate FSB poll, 97% of small businesses said the VAT cut from 17.5% to 15%, as announced in the Chancellor’s Pre-Budget Report in November, has had no impact on their trade at all.
John Wright, FSB National Chairman, said: “These startling figures show there is still more to be done by Government and the banks to ensure businesses can survive in this economic climate. Small businesses are doing all they can to survive the recession but they need better support from the Government, the banks, and the public and private sector.
“The Government must use its meetings with the banks to monitor the guarantee scheme and assess why loans are still being refused, while both Government and bank branch managers must do more to promote these funds.
“The FSB was pleased to see the introduction of the Prompt Payment Code but we now need more action to tackle late payments. We would like to see Companies House given sufficient power to penalise late payers in the commercial world while the Government must do more to ensure the public sector does its bit to help the economy.
“The small business sector is a vital source of employment and turnover for the UK economy, especially during these tough times. But these figures show that there is still an avalanche of stumbling blocks stopping this vital sector from surviving and recovering.”