FSB News Release
PR 2012 02
Issue date: Monday 16 January 2012
Small business confidence crashes at end of 2011
Small business confidence plummeted in 2011 as businesses were hit by high inflation, rising utilities bills and reduced consumer spending power according to the latest findings from the Federation of Small Businesses (FSB) ‘Voice of Small Business' Index.
The Index, comprising some 1,600 responses from businesses across the UK, recorded a score of -24.5 – the lowest level since the Index started in 2010 and is a fall of some 15.2 points over the quarter. Given that economic recovery is relying on business investment to create jobs and support the recovery, the ongoing weak sentiment is worrying.
And, with one in eight (12.6%) firms expecting a worsening economic situation in the coming three months, the FSB is calling on the Government to act on policies and initiatives already announced to help boost small business confidence so that they can invest and grow.
While the short term prospects look weak, an improving inflation outlook will certainly help confidence over the year. Inflation is expected to fall back sharply this year as the impact of 2011's VAT rise lessens, with recent energy price cuts an encouraging sign inflationary pressures are finally easing.
Falling inflation should help cash-strapped consumers and give more room for discretionary spending. Businesses will benefit too as the cost pressures they faced in 2011 fade, which should feed into better margins and improved profitability.
Reforms announced by the Government should help too. The FSB has supported many of the policies outlined in the Growth Reviews and the Autumn Statement, such as measures to encourage bank lending to small businesses and boost investment through the seed enterprise investment scheme. Proposed reforms to the planning system and government procurement contracts to increase small firms' access were steps in the right direction too.
However, many of these measures will take time to feed-in. The key now for all levels of government is to focus on implementation: small firms need to see action to match the rhetoric and to see tangible actions that will benefit their businesses and permanently change the business environment for the better.
John Walker, National Chairman, Federation of Small Businesses, said:
"The message is clear – things are going to get worse before they get better. But, we are hopeful that as the inflationary pressures lessen in 2012, that businesses will become more confident. There are some good policy proposals in the pipeline too. However, the Government needs to quickly put in place the actions that it has promised. Small firms have heard what the Government has to say but are still waiting to see implementation. We believe that must be the Government's priority: to make 2012 the year of doing, with the aim of creating a dynamic business landscape in which our entrepreneurs can grow and flourish."
Charles Davis, Managing Economist, cebr, said:
"The Q4 survey shows that small businesses are fighting a tough battle against a worsening economy. On the upside, falling inflation should ease the pressure on margins and should allow interest and mortgage rates to stay low for at least the next two years."
Notes to Editors
1. Key findings this quarter:
- The Small Business Index (SBI) dropped to its lowest level on record as the extent of Britain's economic malaise becomes more obvious
- All areas of the UK except for the East of England reported falling business confidence, but even there the outlook remains negative
- The balance of businesses reporting falling revenues rose to the highest level since the first half of 2010
- In addition to current declines, revenue expectations for the coming three months have fallen to their lowest level yet
- A growing balance of firms has laid off workers, with the intention to reduce staff further becoming more wide-spread
- Business services, the financial sector and the computing and related industries are faring best amid the difficult economic environment. They are the only sectors reporting a mildly positive outlook
- Sectors dependent on consumer spending as well as those affected by high fuel prices suffered during the fourth quarter, with the transport-related and the motor vehicle-related sectors both reporting a score below -50 points
- Over three quarters of firms reported rising costs as inflation continued to put pressure on margins
- Commodity prices were the main drivers of inflation as fuel, utilities and inputs and raw materials were all cited by over 40% of firms as driving up costs
2. The FSB is the UK's leading business organisation with more than 200,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk
3. The FSB ‘Voice of Small Business' Index is a quarterly macro-economic report analysing the trends of small businesses in the UK market. To view the ‘FSB Voice of Small Business' Index please go to www.fsb.org.uk/small-business-index
4. This report has been produced by the centre for economic and business research (cebr). The figures are based on a survey carried out between 5 and 19 in December 2011 and received 1,674 responses. To find out more visit www.fsb.org.uk/survey-panel
Andrew Cave, Chief Spokesperson: 07917 628991
Prue Watson: 020 7592 8121 / 07825 125 695 firstname.lastname@example.org
Sara Lee: 020 7592 8113/ 07595 067068 email@example.com
For regional FSB contacts please go to www.fsb.org.uk/regions