Small operators must plan ahead to survive spending cuts, say experts

By Lorraine Heller

- Last updated on GMT

Related tags: Hospitality sector, Business

Phil Orford
Phil Orford
Smaller companies will face a tough year ahead, as higher tax and restrictive employment law create barriers to growth, according to the Forum of Private Business.

The hospitality sector in particular is likely to face challenges in 2011, and operators in the sector will have to work harder to keep business coming through the door, said the business support group.

“We expect one of the main challenges facing small to medium-sized enterprises (SMEs) in the hospitality sector this year will be the VAT rise,” said Chris Gorman, spokesman for the Forum of Private Business.

“Obviously, much of what the sector sells is charged at the full rate, so with consumer spending already on shaky ground, small hotels, restaurants and licensed premises will have to work even harder to encourage customers to part with their money.”

“Hotels and restaurants which rely on bookings from public sector organisations, such as health trusts and local authorities, should also plan ahead very carefully as hospitality budgets are likely to be one of the first casualties of public spending cuts. “

Employment laws

Recruitment in the SME sector has also become a challenge, as smaller businesses struggle to recruit people with the right skills and knowledge for the job.

According to the Forum of Private Business, employment law should no longer be a barrier to job creation and needs to be simplified so employers can create jobs to grow their businesses.

“Employment laws do have a disproportionate effect on smaller firms in the hospitality sector as it is a labour-intensive industry, typically with a high turnover of staff, which equates to a lot of costly and time-consuming paperwork,” explained Gorman.

“The sector’s high dependency on migrant labour and mixture of staff on permanent, temporary and casual contracts can also increase the amount of checks and HR expertise required to ensure compliance with employment legislation.”

Get Britain Trading

The Forum, which is a non-profit organisation founded in 1977, plans to launch a campaign to help SMEs in the UK.

‘Get Britain Trading’ will highlight the contribution smaller businesses make to the British economy, and will urge the Government to place their interests and concerns at the heart of its enterprise policies for 2011.

The Forum’s chief executive Phil Orford said: “Small businesses hold the key to a private sector-led recovery, however they require fair and open trading conditions in order to grow and create jobs.

“We are working to ensure small firms are ready and able to trade as the economy continues to recover, including supporting exporters, providing protection against utilities companies and helping to open up public procurement opportunities, as well as assisting with accessing new technologies and sales and marketing techniques.

“Like the economy as a whole, small businesses across the UK are entering a crucial period. With the Forum’s support, protection and reassurance – and the right policies from the Government – it can also be a year of renewed profitability.”

Related topics: Business, Restaurants, Hotels, Pubs & Bars, VAT

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