smallbusiness.co.uk: Helping your business think big

Small businesses are being put off from taking on staff by issues ranging from the state of the economy to access to finance, research finds.

According to a survey of 1,700 companies by the Federation of Small Businesses, insufficient work and uncertainty over contracts (37 per cent), the state of the economy (33 per cent), cash flow (31 per cent) and access to finance are preventing firms from employing.

With 2.46 million people out of work, the FSB believes that it is crucial that the government provides incentives to help small businesses to take on staff and tackle unemployment.

According to the survey, ensuring invoices are paid within 20 days would encourage 17 per cent of small businesses to take on staff.

Nearly a third of respondents say that reducing National Insurance Contributions (NIC) payments for the first six months of employment would encourage them to take on more staff, and 11 per cent say extending the NICs holiday scheme would be an incentive.

The government introduced a NICs holiday for start-ups that take on up to ten employees in 2010, but the FSB believes this does not go far enough and urges the government to extend the NICs holiday to existing firms with up to four members of staff that take on up to three new employees.

FSB national chairman John Walker says, ‘Throughout the recession, we all heard the struggles small firms faced as many had to shut up shop because they were being paid late, and couldn't access finance from the banks, leaving their cash flow in a volatile position. These same issues are now preventing small firms from taking on staff.

‘It is not only imperative that the government creates an environment for job creation, but that the banks lend to small firms and businesses are paid on time, to give small firms the confidence they need to grow their business and employ.’