Employment stats don’t reflect lived reality, say small employers

The UK’s largest business group is urging policymakers to increase a targeted employer National Insurance Contributions (NICs) break as the latest Office for National Statistics (ONS) figures show that the vacancy rate has hit an all-time high.

In London, Scotland and the South East there are still fewer employees on payrolls than there were pre-pandemic. The number of sole traders has fallen more than 10% from 4.7 million in June 2019, before the pandemic hit, to around 4.2 million.

Elsewhere, the latest HMRC statistics indicate that 72% of employees on furlough belong to businesses with fewer than 50 employees – the job retention scheme will close at the end of this month.

Meanwhile, the Health and Social Care Levy Bill – legislation to enact the NICs and dividend taxation increases announced by the Prime Minister last week – will be voted on in Parliament today.  

The developments come amid reports that the Government is planning to scrap the New Enterprise Allowance, an initiative that provides those out of work with mentoring and finance to start a business. The scheme has helped thousands to start a business since its launch, the vast majority outside London and the South East.   

 

Federation of Small Businesses (FSB) Development Manager for Hampshire, Dorset and Isle of Wight Nicola Bailey said: “While these employment figures are encouraging on the face of it, they don’t reflect the lived reality for many small employers.  

 

“Labour costs are rising, skills shortages are making it harder and harder to recruit, and several regions and sectors are struggling to find their feet. With the end of furlough only weeks away, policymakers cannot afford to be complacent. Seven in ten of the million plus people supported by the job retention scheme belong to businesses with fewer than 50 staff. It’s the smallest employers, and their teams, that will bear the brunt of furlough’s wind-down.

“What small businesses are looking for at this point is measures to facilitate the confidence and cashflow they need to retain and recruit as we head into the critical final quarter of the year. As such, last week’s announcement of NICs and dividend tax hikes came as a real blow. The Government has previously recognised the need to protect small firms from employer NICs – the jobs tax – with the Employment Allowance. We’re now encouraging it to go further: uprating the allowance to support firms struggling with recruitment costs, freeing up cashflow to spur the recovery of local communities, and promote hiring as furlough ends.   

“Reports that the New Enterprise Allowance is to be shelved are deeply concerning. With furlough ending, and our critical self-employed community shrinking in size, this is exactly the moment when we should be encouraging more individuals to start businesses – those that have seen first-hand how the economy has changed over the last 18 months can create the thriving firms of the future.

“The scheme has been an important contributor to the levelling-up agenda. Scrapping it, especially at this juncture, would be a mistake. Instead, the Government should be scaling it up, and ensuring it reaches more of the young people who have, in a lot of cases, borne the brunt of covid-linked disruption.”

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