Optimism won’t last without more help, says FSB leader
Andrew McRae: firms face being crushed by debts
Growing optimism amongst Scottish smaller firms won’t last unless ministers do more to help them tackle escalating costs, says a business leader.
Optimism is at its strongest since the summer of 2015, according to new research.
The Federation of Small Businesses (FSB) figures show the average Scottish business is now more hopeful about prospects than its UK-wide equivalent for the first time since the third quarter of 2020.
FSB’s Scottish small business confidence index rose to +20.5 points this summer from +18.8 points in the first quarter of the year.
The equivalent UK-wide figure fell to +18.6 points from +27.3 points in the first three months of 2021. The index measures whether firms believe trading conditions will improve or deteriorate over the next three months.
However, almost two thirds (64%) of Scottish firms reported an increase in running costs over this time last year, while only 8% said their overheads had decreased. Further, more Scottish firms believe their profits will fall over the next three months than increase.
Andrew McRae, the FSB’s Scotland policy chairman, said: “These figures show just how tough the last 18 months have been for Scottish businesses.
“Despite punishing increases to overheads and fears about profits, firms north of the border are the most confident they’ve been in years that trading conditions will improve.
“But this post-lockdown positivity won’t last unless policymakers get behind our local firms during the recovery.
“That means taking steps to tackle spiralling overheads. It means ensuring that smaller firms aren’t crushed by the debts they took on to survive. It means providing new protections for the self-employed so that we can encourage the next generation of entrepreneurs.
“As the economy has reopened, skills and staff shortages have given firms across Scotland a headache. Self-isolation rules and a reduction of workers caused by the UK leaving the EU are amongst the factors that have been blamed.”
UK grows at fastest for 80 years
The economy is now expected to grow 7.6% this year – the fastest rate of growth since 1941 – rather than the 6.8% predicted by the EY Item Club in April’s Spring Forecast.
This is the second successive upgrade for the 2021 GDP forecast and means the economy is now expected to return to its pre-pandemic peak by the end of 2021 – two quarters sooner than expected in April and almost three years earlier than appeared likely in the 2020 Summer Forecast.
Growth of 6.5% is now expected in 2022, an improvement from the 5% growth forecast in April. This will be followed by growth of 2.1% in 2023 and 1.6% in 2024.
Quarter-on-quarter growth in 2021’s second quarter is expected to clock in at 5.1%, followed by growth of 3.2% in the third quarter and 1.9% growth in the fourth.