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20 September 2017

Record number of SMEs to downsize, close or sell as confidence plummets - FSB NI

A RECORD number of small businesses are planning to downsize, close or sell their businesses amid unprecedented political and economic uncertainty and tumbling confidence levels, according to the latest Federation of Small Businesses (FSB) Small Business Index (SBI).

The SBI, published today, reveals that small business confidence stands at +1 in Q3 2017, down from +15 in Q2, and close to the -3 seen immediately after last summer’s Brexit vote.

The new research shows a majority (70%) of small firms reporting a rise in operating costs compared to the same period last year. Labour costs  and taxation are frequently mentioned as causes of this increase.   Additionally, small businesses most frequently identify the domestic economy (63%) and consumer demand (35%) as barriers to growth.    

One in eight small businesses (13%) now expect to downsize, hand on or close their business. The figure is at its highest since the SBI launched in 2012.

Wilfred Mitchell OBE, FSB NI Policy Chairman:  ““The most recent SBI figures are highly disturbing as they reveal that a record amount of small business owners are expecting to downsize, sell or close their business. 

“Increasing inflationary pressure and a weakening domestic economy are identified as the twin drivers of plummeting confidence amongst small businesses and consumers alike throughout the UK.   In Northern Ireland political instability remains a key concern for our members; FSB will continue to engage with political representatives as the conference season commences both in Northern Ireland and more widely, the UK.”

Exporting small firms remain optimistic about their prospects. The proportion reporting an increase in overseas sales is at a three-year high (39%) and a similar proportion (35%) expect export growth to continue over the coming quarter.

Mike Cherry, FSB National Chairman added: “The right Brexit deal, including a transition period of at least three years and a comprehensive Free Trade Agreement, will be critical to ensuring small firms can access key overseas markets. 

“Ahead of the Autumn Budget, FSB is urging the UK Government to bring forward measures to improve exporting, such as tax credits and export vouchers, which would encourage more businesses to seek international opportunities.

“Any new tax grabs or loss of reliefs for our members would exacerbate the existing challenges being faced by small businesses throughout the UK”

The SBI reveals that the net balance of firms reporting higher revenues has hit a four-year low and the proportion applying for credit is at its lowest since 2014. Less than a third of small firms expect to increase investment in the next three months (27%), a five percentage point drop compared to Q2. 

Mr Cherry added: “The drop-off in applications for external finance is a real concern. It’s another area where Brexit could make or break small business prospects. A botched withdrawal from the European Investment Fund would create further barriers for small firms looking to access finance.  

Action needs to be taken – increasing the Employment Allowance to £4,000 would help keep hiring intentions strong and boost pay levels.”

Read more about Wilfred Mitchell