Scottish business confidence slumped over the last three months, after a modest recovery earlier this year, according to new figures from the Federation of Small Businesses (FSB) in Scotland.
FSB’s Scottish small business confidence index fell to -26.3 points in the third quarter of 2020, down from -10.5 points earlier in the year.
The small business campaign group says that business confidence likely fell in the autumn as the prospect of new coronavirus-related restrictions rose. According to the research, almost a quarter of Scottish business owners (24%) believe that conditions for their business will get much worse over the next three months, a fifth (19%) believe they’ll get slightly worse, while only one in ten (11%) believe conditions will get a lot better.
Andrew McRae, FSB’s Scotland policy chair, said: “Over the summer, many Scottish smaller firms were grateful for the admittedly short window when trading was close to normal. As the nights have drawn in, policymakers have announced new restrictions and warned of the prospect of more. With many firms’ cash reserves already exhausted, it is little wonder many operators are fearful about the future.”
Widespread disruption to the economy has cause revenue growth to fall, with over half (53%) of the Scottish businesses surveyed reporting a drop. A similar share (49%) expect revenues to fall next quarter.
On a UK-wide basis, a record one in four (25%) small firms say they have reduced headcounts over the past quarter. An even higher proportion (29%) expect to make redundancies over the coming three months.
However, Scottish firms are now on average slightly more optimistic than the UK average for the first time since the spring of 2019. The UK-wide index fell to -32.6 points, down 28 points on the previous quarter.
Andrew McRae said: “These figures show that, as businesses’ income has collapsed, many business leaders have been forced to make very difficult choices. If government doesn’t want to see a glut of job losses, then policymakers will need to either provide sufficient support for firms or reduce restrictions on the economy.
“We’ve expressed hope that the Scottish Government’s new strategy could be a blueprint for re-opening the economy, rather than shutting it down. But our members are telling us that they’ve little faith that things are going to get better anytime soon. Ministers in Edinburgh have their work cut out to persuade those in business that trading conditions are going to improve.”
With this weekend cited as the final deadline for a breakthrough in UK-EU trade talks, more than half (53%) of UK exporters surveyed by FSB reported that sales are falling. Four in ten (43%) expect a drop in exports over the coming three months.
Mike Cherry, FSB’s National Chair, said: “More than four years on from the EU referendum, Scottish small firms need clarity around what the end of the transition period will mean now more than ever. Negotiators on both sides must pull out all the stops to secure a deal, one that includes a substantial small business chapter outlining how the new agreement will help the firms that make-up 99% of the UK business community.
“As things stand, small firms are being told to shell out for both safety measures and preparations for our new relationship with the EU. Many would like to do more but have run out of cash after a torrid six months. If the Government wants small business owners to step-up preparations, it needs to make doing so financially viable. The introduction of transition vouchers – grants worth up to £3,000 for small firms that trade internationally to spend on preparations for 1 January – would go a long way to aiding efforts.”
- FSB surveyed 1,564 small firms for the Q3 2020 Small Business Index at the end of September 2020, with 190 based in Scotland. The SBI is conducted by independent research company Verve. The headline SBI confidence figures are based on a weighted index, with the share of firms reporting ‘much improved’ or ‘much worse’ confidence allocated double weighting.
- The confidence index measures whether firms believe that business conditions will improve or deteriorate, with a negative figure showing that the average business believes that trading conditions will worse.
- In the second quarter of 2019, the Scottish confidence index read +3 points, while the UK-equivalent read -8.8 points.
- Only UK-wide figures are available at this time regarding employment intentions.
As experts in business, FSB offers members a wide range of vital business services, including advice, financial expertise, support and a powerful voice in Government. Its aim is to help smaller businesses achieve their ambitions.
External Affairs Manager, Scotland
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