Business

Colin Borland: Ministers must use every lever to ease cost crisis facing small firms

Every so often, usually on a bank holiday or particular anniversary, the BBC Parliament channel re-runs its full, unexpurgated coverage of an old General Election night.

If you’re a fan of spotting young, fresh-faced candidates who would go on to become major political figures, or marvelling at how television graphics were made in the days before computers, it’s worth a watch.

Some of it, of course, is like looking into a glass museum case. The presenters’ deference to those who hold high office seems as quaint as guests smoking their way through a studio interview.

But the programmes also prove that, if you wait long enough, all the same issues will come back round.

The key battleground in the February 1974 election, for example, asides from our relationship with Europe, was inflation and the cost of living crisis.

Those of us who got used to living in a sustained period of relatively low inflation and negligible interest rates might have been forgiven for thinking that this was a problem consigned to those dark days of industrial strife.

But, with households and businesses now engaged in a daily struggle with rising costs, inflation rates are back firmly at the top of the national agenda.

The latest Federation of Small Businesses’ (FSB) quarterly index shows costs are up for over eight in ten small businesses in Scotland, with fuel, utilities and other input prices all cited as major issues.

The Scottish Government’s Business Insights and Conditions Survey reports that, between 13 and 26 December, forty five percent of businesses said that the prices they paid for materials, goods or services had increased by more than normal price fluctuations. This figure rises to nearly two thirds for construction and manufacturing businesses.

Crucially, though, only sixteen percent of firms said that they had increased their prices to customers.

What this means, of course, is that there’s a lot of inflationary pressure stored up in the system that hasn’t yet worked its way through to higher prices – meaning inflation is set to rise further.

And there’s more to come.

From April, the UK’s small employers will need to find their share of the £5.7 billion rise in Employer National Insurance Contributions (NICs).

Against a backdrop of last-minute Christmas Omicron restrictions severely curtailing festive trading, reducing income and invalidating forecasts, this extra levy will be even harder to pay without cuts being made elsewhere, or prices going up.

Further, when Office for National Statistics figures show that the UK government borrowed £13bn less this year than expected, many have asked whether the NICs hike is as fiscally essential as has been claimed.

If it’s not only unfair, but also unnecessary, surely it’s time to rethink.

Spring will also see a rise in overheads for those Scottish businesses in retail, hospitality and leisure who are currently receiving a 100% discount on their business rates bills thanks to Covid-related reliefs. This discount will be cut to 50% from April and then removed completely in the summer.

Again, given how the landscape has changed since these plans were announced – and that the nature and detail of ongoing Covid control measures are largely unknown – a review would be wise. And this is before we even mention energy bills, which, it hardly needs saying, are set to rocket unless we do something about, for example, the VAT that will be added to already inflated sums.

There’s obviously a limit to what any government can do when faced with global market pressures. But that makes it all the more important that domestic governments use the powers that are at their disposal to stop the cost of living and doing business becoming too high a price to pay.

Colin Borland is director of devolved nations for the Federation of Small Businesses

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