Business owners see Thursday’s election as an opportunity to change Britain’s enterprise culture for the better, with one in ten intending to vote for the party they hope will manage the economy most effectively, according to new research from the Forum of Private Business.

But many fear their businesses could suffer because of the uncertainty created by unclear tax plans, the threat that spending cuts will jeopardise public sector opportunities and the possibility of a hung parliament. According to the Forum’s latest Economy Watch member panel survey, 55 percent of respondents view the public vote as a platform on which to highlight the issues facing their businesses. Those mentioned most frequently were red tape, economic management and the tax burden.

However, 14 percent of the small businesses surveyed feel threatened by the looming election because of the uncertainty they believe it could create, with many citing a lack of detail on tax plans from the main political parties and possibility of a hung parliament as the main reasons for this uncertainty.

In addition, with spending cuts inevitable in order to plug the gap in public finances, the election is viewed as a threat by businesses who undertake a significant proportion of work in the public sector. “Small business owners are generally confident that the election can be used to highlight their concerns and usher in economic change. However, many feel threatened by the uncertainty caused by a lack of defined policies on tax and red tape as well as threats to public procurement in the wake of anticipated spending cuts and the possibility of a hung parliament,” said the Forum’s Policy Representative Matt Goodman.

“Entrepreneurs want better support, a clearer tax regime – including a reversal in the planned National Insurance rise – prompt payment and less red tape, although there is some scepticism about the delivery of this last measure.” In all, 18 percent of business owners consider ‘economic management’ to be a significant factor that will influence their vote. The same number believe ‘support for small businesses’ will be one of the main issues affecting their decision at the ballot box.

Further, 17 percent cited a better tax regime as a significant voting factor. Other influential factors included addressing the planned National Insurance rise (Ten percent) and reducing red tape and state interference (Nine percent).

Overall, business confidence has increased compared to the previous month’s Economy Watch survey, but more entrepreneurs remain doubtful about growth prospects in 2010.

In total, 44 percent of respondents are ‘confident’ or ‘very confident’ compared to the 39 percent recorded in March. However, more than half (53 percent) are ‘not very confident’, ‘pessimistic’ or ‘very pessimistic’. In April orders increased for 35 percent of the businesses surveyed, fell for 25 percent and remained unchanged for 39 percent. Turnover increased for 38 percent, fell for 21 percent and stayed the same for 41 percentof respondents.

Profitability was up for 33 percent of businesses, down for 32 percent and stayed the same for 35 pedrcent. Late payment was more of a problem for 29 percent of respondents, less of a problem for just four percent and the same for 67 percent. Almost a quarter of businesses (24 percent) increased investment in sales and marketing (with 11 percent reducing this spend and 64 percent indicating no change) and 22 percent increased investment in machinery and equipment (with 18 percent spending less and 60 percent no change). Further, 17 percent increased staff training, ten percent reduced it and 73 percent made no change.

The cost of doing business – excluding tax – increased for more than a third of respondents (36 percent), fell for just three percent and remained unchanged for 61 percent. The tax burden was greater for nineteen percent, fell to 35 percent and stayed the same for 78 percent. Fewer business reported better access to finance, with just three percent saying it has improved compared to six percent in March. The same number reported a deterioration as did in the previous month (13 percent) while 66 percent indicated no change, up slightly from 63 percent in March.

Better financial management had resulted in businesses being able to better access finance in previous months but respondents reported a number of reasons for a deterioration in April. These include poor returns from invoice discounters, increased late payment by debtors and increased lending charges. The number of businesses believing that finance has become more affordable has increased, with 85 percent reporting it as ‘very affordable’ or ‘affordable’ compared to 78 percent in March. In total, just 10 percent feel that finance is ‘very unaffordable’ or ‘unaffordable’, which is consistent with the data from the last two months. Improved business and consumer confidence was selected by 26 percent of entrepreneurs as the main factor that would help their businesses grow – up by two percent from March. The next was ‘internal business development’, which was chosen by 24 percent (down slightly from 26 percent), followed by economic improvements and stability, selected by 21 percent of respondents (a slight fall from the 25 percent recorded in March). Other factors were training and recruitment initiatives (11 percent), specific industry incentives (ten percent).

One in three respondents (32 percent) now anticipate making no investment in their businesses in 2010, up from 24 percent in March. In all, 45 percent expect to invest in sales and marketing (down from 54 percent), 14 percent in machinery and equipment (down from 18 percent) and 19 percent in product and process development (down from 25 percent in March). Employee numbers have dropped by four percent over the last year and approximately eight percent of businesses have reduced their working hours. Some of the changes were in agency staff or use of contractors. However, a number of vacancies from March remain unfilled despite relatively high levels of unemployment, indicating that some businesses are looking for highly specialised staff.

5 May 2010
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