Small businesses lost confidence in Q4

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Retailers feeling the strain of VAT and fuel increases at end of 2010

Small businesses ended 2010 less confident than they were at the beginning of the year, according to the Federation of Small Businesses’ (FSB) latest Voice of Small Business Index.

The report, which looks at the general health of the small business sector, found that, in the fourth quarter of 2010, business confidence fell for the third successive quarter.

The index also shows that small businesses expect employment growth to weaken in the coming months, with 77.7% of small firms expecting to keep employment levels the same, but 12.4% expecting to decrease the number of staff they have – up from 10.4% in quarter three. Retail growth in 2011 is likely to be "sluggish at best."

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Chairman of the FSB John Walker said: “A number of pressures on small businesses are beginning to come to a head, such as the increase in VAT and fuel duty, placing more strain on cash-flow. This combined with the severe weather at the end of 2010 has meant that small firms are not as confident about their prospects in 2011."

He added: “With inflation above target and the labour market still weak, small firms cannot rely solely on the consumer for growth in 2011. So it is imperative that the Bank of England base rate is kept at 0.5% as, once the impact of the VAT rise is excluded, inflation is relatively low.” 

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