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10 December 2018

Scottish small business confidence hits all-time low

Reference number: SPUR1012

Business optimism in Scotland is at the lowest ebb ever recorded by the Federation of Small Businesses’ (FSB) quarterly small business confidence index.

The UK index, which measures business owners’ views on whether trading conditions will improve or deteriorate, fell to -9.9 points from -1.7 points the previous quarter. This means that confidence among UK small firms has fallen to its lowest point since 2011.

The equivalent Scottish figure crashed to -32.6 points from -13.2 points earlier in the year, the lowest since Scottish figures were collected.

The FSB has released the figures ahead of Tuesday’s key Brexit votes in the House of Commons, as well as the Scottish Government’s Budget on 12 December.

Andrew McRae, the Federation of Small Businesses’ (FSB) Scotland policy chair, said: “These gloomy figures show that the uncertainty and confusion associated with Brexit is having a huge impact on business optimism. It looks likely that confidence will only return when there’s a clear path beyond the March 29 deadline that safeguards smaller businesses’ interests.

“While Scottish business confidence has long tracked below the UK average, this new low suggests firms north of the border are particularly distressed about the current state of affairs.”

A previous low of -28.9 points was recorded in Scotland in the last quarter of 2016. The second-lowest UK SBI (-2.9 points) reading since 2011 was also recorded in the wake of the EU referendum.

Across the UK, more than two thirds (67%) of small firms do not expect to increase capital investment in the coming quarter while one in seven (15%) are planning to actively decrease investment.

With EU net migration at a six-year low, the number of UK small business owners citing lack of access to appropriately skilled as a barrier to growth is also on the rise, with a third (36%) of firms highlighting this as an issue. However FSB’s data shows that half of UK small firms still aspire to grow their businesses over the next 12 months, a figure largely unchanged from this time last year.   

Andrew McRae said: “Tumbling investment intentions should worry decision-makers as should skills shortages. That is not a foundation on which to build a sustainable economy.

“But our figures show that half of our businesses still want to grow despite the obvious challenges. We want to see those in charge make life easier for these operators. UK Ministers could start by designing an immigration system which works for Scottish smaller firms – especially in sectors like tourism.”

Last month, FSB wrote to the Scottish Government outlining moves they could take to boost the economy as they set out their spending plans for the next financial year.

Andrew McRae said: “This week, the Finance Secretary must do what he can to shore up optimism. In our discussions with Ministers we’ve stressed the importance of rates reforms, underlined the need for skills development and urged the Scottish Government to do what it can to prepare its agencies and business community for post-Brexit trading conditions.

“We’d urge Derek Mackay to gear his budget toward giving smaller operators a much needed lift.”

 

ENDS