Confidence is Key

Confidence is a key measure for small business owners. This is my first ‘reflections’ since the excitement of the election and the silence imposed by the pre-election period. Since the new Government started work, we’ve been planning the next stage of the ongoing projects we hope will contribute to increasing that confidence and the productivity and growth the Government wants.

The various surveys and indices show that while it’s not exactly hitting record highs, confidence has stabilised. ICAEW’s Confidence Monitor shows small businesses are confident about business for the next 12 months.

We’ve been through a few turgid years of political instability, with soaring inflation and interest rates pushing up the cost of doing business, and skills and labour shortages reducing capacity and capability to rebuild and regenerate. Yet micro and small businesses in the UK have believed in their ability to flex, pivot and hold on. Now we need to build confidence to succeed.

5.5 million micro and small businesses operated in the UK in 2023. They accounted for 13 million jobs, which is almost half of private sector employment. They’re responsible for a third of all business turnover at £1.6 trillion. Those jobs and that turnover means they are crucial to the economy, wider society and local communities. They are also vital when it comes to working out how to resolve the productivity and growth challenges we face.

At the OSBC we firmly believe that at the heart of increasing productivity and encouraging growth lies better payment practices. Micro and small business owners who don’t have certainty about when they will get paid are forced to waste time that could be used more productively, in chasing up missing payments. That leaves them in fear of damaging their working relationships with their bigger customers and the possibility of losing future work opportunities. Fear of not getting paid and of losing customers leads to sleepless night with all the attendant mental health and relationship problems that can bring, which in turn reduces productivity. There is also a lack of willingness,  capacity or confidence to invest when you aren’t being paid on time or fairly. It isn’t just the small supplier whose business suffers from under investment but the bigger customer. A better supplier, who has invested in up-to-date equipment and processes, is innovative and up-skills or recruits better people delivers a better product or service so everyone wins. Without that the supply chain is less sustainable and resilient.

Our vision is an environment where overdue payments to small businesses are rare, it is usual practice for suppliers to be paid within 30 days or less and extended contractual payment terms and unfair payment practices are no longer acceptable. If we can deliver that vision we will play a huge part in helping the UK micro and small business sector lead the economy to the growth and productivity we all aspire to.

In the meantime, technology is developing by the day and that’s helping businesses big and small improve engagement and payment times. Bigger firms are increasingly using e-invoicing and onboarding their suppliers. When confidence is low smaller businesses are reluctant to engage and invest for fear of making wrong choices. With confidence growing or at least stabilising smaller firms will be keener to embrace newer tech and to find out how it can benefit them and their customers.

One essential way of funding those steps to increased productivity and growth is to make sure they get paid quicker. #EveryoneBenefits