The country’s largest business group has called on policymakers to cut Employer National Insurance Contributions (NICs) and relaunch the SME Brexit Support Fund.
The Federation of Small Business (FBS) is urging the government to address rising input prices, lack of access to the right staff and trade disruption which it warns threaten the road to post-lockdown recovery.
The Lancashire-headquartered organisation’s Small Business Index (SBI) report lays bare the impact of rising costs and skills shortages.
Exporters are also continuing to struggle amid rising shipping fees and the loss of goods in transit.
Among the 1,500 respondents that contributed to the full Q2 2021 report, close to two thirds (64 per cent) revealed their operating costs have risen over the past year.
Four in ten (43 per cent) cited inputs such as raw materials as a contributor to the rise, an 11-percentage point increase on the same quarter in 2019. Labour (36 per cent), utilities (28 per cent) and fuel (26 per cent) were also commonly flagged.
Despite a cooling in consumer prices, Office for National Statistics (ONS) figures showed growth in the headline rate of input prices of 9.9% last month.
Elsewhere, more than a third of small firms (37 per cent) highlighted access to appropriately skilled staff as a primary barrier to growth over the coming 12 months.
Close to seven in ten (70 per cent) of those in the construction sector cited skills shortages as a barrier.
The ONS has also revealed that there were 953,000 job vacancies in the three months to July, a record high.
The FBS study also reveals that on top of the one in five (23 per cent) small exporters that have temporarily or permanently stopped selling into the EU, a further fifth (21 per cent) are considering halting sales.
More than half (53 per cent) have had goods held indefinitely at EU border crossings since April and a similar proportion (45 per cent) have lost goods in transit.
FSB national chairman Mike Cherry said: “Small firms are emerging from lockdowns under the strain of spiralling input and shipping costs, skills shortages, new exporting paperwork, emergency debt repayments, rent accruals and business rates.
“The government should urgently move to mitigate cost pressures by reducing Employer NICs, which are serving as a jobs tax and yet another cost to think about in an environment where finding the right people is a nightmare.
“This government was elected on a manifesto that rightly promised to cut the jobs tax, and ministers must rediscover that reformist zeal if they want to unlock growth within the small business community and secure our economic recovery.”
He added: “Our exporting firms tend to be among our most innovative and profitable. Unless we can get them firing on all cylinders again – and produce more of them – we’re going to find our recovery is permanently hampered.
“Small businesses didn’t have a chance to make full use of the SME Brexit Support Fund before it closed. It should be revamped and relaunched to help our great international-facing firms access the help they need to innovate, hire and grow over the critical months ahead.”