The move was prompted by “depressing” results from FSB’s quarterly macro-economic report on small businesses in the UK, which forecasts stagnation over the next three months as companies struggle with the effects of an ongoing sluggish economic recovery.
In response to these latest figures from its Voice of Small Business Index, FSB is calling on the government to cut VAT in the tourism and the construction sectors to 5 per cent for a year, “to help give the economy a real boost”.
This follows a move by the hospitality industry to lobby for a VAT rate of 5 per cent, a campaign which has gathered the support of VAT experts such as Jacques Borel, the man behind the 5.5 per cent VAT reduction for restaurants in France, as well as investors in the hospitality sector and sector trade groups.
Low business confidence
FSB today warned of the damage that falling business confidence will do to the economy. Results from its latest Index show that businesses were less confident in the second quarter of 2011 than they were at the start of the year.
“The economy is still in a fragile state and these figures clearly show that the Government’s growth strategy is just not working,” said FSB national chairman John Walker.
“In an economy characterised by high unemployment and muted demand, more needs to be done to encourage businesses to take on staff and grow their business so that the recovery can really get back on track.”
FSB’s Voice of Small Business Index analyses the trends of small businesses in the UK, based on responses from almost 2,000 businesses.
In the second quarter this year, the Index fell by 6.4 points from +6.7 to +0.3. Confidence among hotels, restaurants and bars fell by nine points from +13 to +4 in the first quarter.
Economic recovery
“Since the start of 2010, the FSB Index has proved to be a good barometer of the path that economic growth will take, so the news that it has fallen back to almost zero paints a very worrying picture for GDP,” said Walker.
“We now need the Government’s actions to match its rhetoric, and it must finally deliver on actions in its growth strategy.
“We must see a cut in VAT to five per cent in the construction and tourism sectors to boost consumer demand. It is tangible measures like this that will actually help small businesses to be able to grow their businesses and grow the economy.”
FSB spokesperson Andrew Cave told BigHospitality that the group will be campaigning the government on VAT measures “across the summer and into the autumn”.
“We’re in ongoing talks with the Treasury, and we hope they’ll adopt these measures in the Autumn Statement when Parliament reconvenes, with a view to the VAT cut being implemented as early as this year,” he said.
“We’re also linking this to the Olympics, because there’s a huge potential for the legacy after the Games, and we want to make sure that the best possible regime is in place for businesses to benefit from that.