Confidence of business owners_W532pix

Guy Rigby, head of entrepreneurial services at Smith & Williamson, said: “There is no doubt that small businesses continue to have gripes about the government policy. However, the Prime Minister seems to have caught them in a buoyant mood. It’s possible that, by triggering Article 50, entrepreneurs at least feel some progress is being made. In addition, the high profile climb-down on self-employed National Insurance Contributions (NICs) appears to be evidence of a government that is listening.

“Notwithstanding this, there has been a growing mistrust in the government due to a credibility gap between what the government is saying and what it is actually doing. Within the past few months, they have delivered an industrial strategy green paper, a scale-up champion and a scale-up taskforce but this has yet to deliver meaningful change. However, at the same time, the government has slashed the tax-free dividend allowance by 60%, causing problems for many.

“The Apprenticeship Levy is a great idea in theory, but less than half (46%) of our respondents believe it is likely to be valuable in practice. The administrative necessities could mean that most small businesses will not participate, leading to disappointment over the number of new apprentices. It is, therefore, a concern that the levy could just become a stealth tax on larger businesses.”

SMEs taking Brexit in their stride

The Enterprise Index highlights the fact that 54% of respondents believe that the uncertainty associated with the triggering of Article 50 negatively affected their business. However, this does not appear to have negated any plans for growth, with nearly two-thirds (65%) looking to increase headcount over the next three months, an 11 point rise from the last quarter.

“The negotiation of a Brexit deal will have many layers, with the ramifications from any individual part having potentially widespread consequences,” Guy Rigby said. “While the current mood is buoyant, SMEs need to be aware that changes to our relationship with the EU could affect them on a day-to-day basis. Recent growth decelerators, such as stagnating real wage growth and lower consumer spending, could be a portent of things to come.*

“Confidence is important, but it is vital that SMEs keep a close eye on the changing landscape and guard against any irrational exuberance.”

Want to have your say on the economy? You can take part in the next Smith & Williamson Enterprise Index here.