Confidence at lowest ever level
Small firms’ optimism at rock bottom ahead of crucial week
Andrew McRae: ‘Brexit is having a huge impact on business optimism
Small business optimism in Scotland has plummeted to its lowest ever level ahead of a crucial Brexit vote at Westminster and the Scottish Budget at Holyrood.
The Federation of Small Businesses’ (FSB) says its quarterly small business confidence index on whether trading conditions will improve or deteriorate, fell to -9.9 points from -1.7 points the previous quarter, 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 one of the most important political weeks of the year. They confirm the findings of a report released today by accountancy firm BDO.
Andrew McRae, the Federation of Small Businesses’ (FSB) Scotland policy chairman, 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, while the previous UK low was -2.9 points in the third quarter of 2016, both shortly after the vote to leave the EU.
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.
Mr 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.
Mr 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.”
Scottish Labour’s finance spokesperson James Kelly said: “These figures are absolutely shocking and should be an urgent wake-up call for SNP Finance Secretary Derek Mackay ahead of this week’s budget.
“With small business confidence at a record low, it is clear the SNP simply is not doing enough to support local firms that are working to create jobs and boost economic growth.
“It is simply not enough for SNP ministers to bury their heads in the sand and blame Brexit – we need real action in this budget.
“Scottish Labour is the only party with a Small Business Strategy that outlines proper support for local firms – and we are the only party that would end austerity and start investing in our economy again.”