Energy costs and broadband top list of SME issues

Published:  11 May, 2012

UK: Energy costs and access to effective telecommunications, including broadband, are the most important infrastructure issues faced by small businesses, according to new research from the Forum of Private Business.

A total of 80% of Forum members responding to the organisation’s Referendum survey on ‘Infrastructure for Growth’ believe that energy costs are ‘very important’ or ‘important’, with the same number citing telecommunications and broadband access – seen as a particular problem in rural locations.

The reliability of the energy supply is also a key issue for 75% of respondents, followed by local banking services (73%) and local roads (65%).

Other small business infrastructure priorities are post office services (60%), mobile communications (59%), the motorway network (56%), the provision of skills training (46%), waste services and recycling (41%), e-communications (32%) and rail transport (23%).

“Improving the UK’s transport network is extremely important but infrastructure is about more than just roads and railways - it is about creating a business environment and road map for growth that paves the way for small firms to be successful and create jobs,” said Jane Bennett, the Forum’s Head of Campaigns.

“We want the Government to build on what it is doing to create a joined-up system where projects on transport and communication work in harmony with proactive policies on energy, tax and red tape to boost business and consumer confidence and put the economy back on track.”

She added: “There is clearly a regional perspective to all of this, with firms in different locations with some issues greater for firms in certain locations. We have noted before that there is something of a ‘postcode lottery’ for public late sector payments, for example, and it appears the same is true in other areas of business, such as variances in business rates and raw material costs as well as transport links.”

A total of 74% of members feel that their location is effective for their business needs, with proximity to good road networks the main reason, given by 16% of respondents. Centrality (14%) and footfall (9%) are other key factors.

Business owners in the North West are most happy that their location is working for their firms, with 79% of Forum members in the region deeming it to be ‘very effective’ or ‘effective’.

In the South West, 78% of respondents are similarly satisfied with their location, followed by those in the Midlands (76%), Wales (75%) and the East of England (75%).

In London 74% of respondents believe that being based in the capital is proving effective for their businesses – more than the South East as a whole, where 67% feel the same. In the North East and Yorkshire the figure is 74%.

Scotland has the fewest business owners satisfied with their location, with 65% believing that where they are based is ‘effective’ or ‘very effective.’

Manufacturers and construction firms are the least satisfied with their location while satisfaction levels appear to increase based on number of employees at a firm - with micro businesses employing fewer than 10 staff less likely to be happy with where they are based compared to other small or medium-sized businesses.

When asked to grade infrastructure-related problems by how they should be prioritised by the Government, most business owners identified business rates (52%), followed by measures to boost consumer and business confidence (both 49%), health and safety regulations (45%), utilities costs generally (44%) and tax policies (44%).

Next, 42% of respondents chose tackling other regulations and 40% reducing the burden of employment law. Late payment and bad debt were deemed to be priorities by 28% of firms, with the same number selecting access to finance more generally.

Overall, 24% of Forum members surveyed want the Government to concentrate on improving their local business infrastructures - more than three times the 7% calling for a focus on national strategic projects. The majority (63%) believe there should be a balance between the two.

With Government services – including HMRC’s online VAT filing and Real Time Information - increasingly provided via the web businesses should not be legally obliged to use online services until high speed broadband has been rolled out across the country.

The Department for Business, Innovation and Skills (BIS) should consult or bring forward proposed consultations on changes to employment law, such as Compensated No Fault Dismissal and ‘protected conversations’, to ensure prolonged business engagement in this important area of policy.

A fairer formula must be found, perhaps by a government-run taskforce, to counter the ever-increasing burden of business rates. In April this year business rates rose by 5.6% as they were pegged to the Consumer Prices Index level of inflation of September the previous year. Whilst the Government has set up a scheme allowing deferral of a percentage of that increase, these sizeable costs are being delayed rather than tackled.

The Forum backs a fuel price stabiliser, to ensure that when oil prices are higher tax take as a percentage of fuel costs falls. There is also a question of fairness in imposing a tax (VAT) on another tax (fuel duty) and the Government should consider excluding the fuel duty element from VAT charges on fuel.

The Government’s scheme offering a £5000 national insurance (NI) holiday for the first ten staff employed by a new business should be expanded. Instead, the Government should offer a £5,000 holiday for the first additional two employees taken on by all businesses. Widening the accessibility of the scheme whilst reducing the extent an individual business benefits could encourage much greater take up.

In November’s autumn statement the Chancellor, George Osborne, announced a number of measures to improve the UK’s infrastructure in order to help businesses and drive economic growth, including nationwide rail improvements and road building schemes.

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