Small firms look to start hiring as tax cut nears

MORE small companies intend to take on additional staff in the third quarter than at any time in the last three years, according to new research released today.

The Federation of Small Businesses (FSB) reveals that 15 per cent have increased staff numbers in this quarter, and have positive intentions for the near future.

In April next year, small firms will benefit from a cut in their national insurance contributions (NICs) of up to £2,000, called the Employment Allowance. An FSB survey shows that 29 per cent intend to use the cut to boost staff wages, and 28 per cent will use it to employ additional staff.

The cut in NICs was announced in the March budget this year, and will come into effect in the upcoming financial year.

Of those small enterprises that do not intend to increase their employment levels after the tax cut comes into force, nearly a quarter want to use the reduction in their tax bill to invest in other resources

John Allan, FSB national chairman said: “Findings show that the Employment Allowance due to kick in next spring will have the desired effect. Through the measure, small firms are looking forward to taking on more staff, expanding their businesses and rewarding existing employees for their efforts.”

However, Allan added a note of caution: “the most recent unemployment figures show that long term unemployment, particularly among young people remains a concern.”

The FSB’s third quarter report was the first since 2010 in which more businesses said they planned to increase their staff levels than cut them back, though nearly three quarters suggested that they do not intend to change employee numbers at all.

Despite relatively weak hiring intentions, over half of small businesses aspire to rapid or moderate growth in the next year. Only 8.5 per cent now expecting to downsize.