Intervene now to avoid scarring communities, small firms urge, as GDP falls and £850m of grants unspent
New figures from the Office for National Statistics (ONS) show that the economy shrank by 0.2% in December during another disrupted festive season, with output in consumer facing services down 3%.
Gross Domestic Product (GDP) is estimated to have grown by 7.5% last year, not enough to offset a 9.4% fall in 2020. Elsewhere, ONS figures highlight that export and import volumes for last year were down £36.8bn and £23.4bn respectively on where they stood in 2018.
The statistics come as the Government reveals that £850m of support grants intended for firms in sectors hardest-hit by pandemic-linked disruption are still held up at council level.
New ONS data also shows that a third of businesses (31%) say turnover over the last two weeks is down compared to normal expectations. The vast majority of importers (72%) and exporters (67%) state that they had difficulties trading internationally last month.
Responding to the developments, Federation of Small Businesses (FSB) National Chair Mike Cherry said:
“This raft of new data shows us that our economic recovery is not yet underway in any true sense.
“As last year ended, pent-up demand should’ve had consumers spending right up to Christmas day and beyond. Instead, the economy actually shrank as omicron anxiety took hold.
“Meanwhile, our small firms that do business internationally were held back by both worldwide supply chain disruption and an ever-growing mountain of new trade paperwork.
“At the same time, close to a billion pounds worth of business support grants for those most in need are still yet to reach them. It’s exasperating to see that, after all this time, some authorities still haven’t got their houses in order.
“Against a backdrop of surging prices and labour shortages, we’re now hurtling towards the unwinding of remaining covid support measures, a national living wage increase and a regressive hike to national insurance contributions in April.
“Unless policymakers intervene before this April flashpoint to cancel the jobs tax hike and alleviate the mounting wider pressures that small firms face, we risk long-term scarring of the economy and local communities.
“In the North West and West Midlands, where the Government intends to launch levelling up accelerators, the NICs hike will hit small employers to the tune of £800m worth of additional outgoings a year. That’s money that should be being spent on investment, upskilling and expansion.”