Small business confidence shows no sign of improvement

Rising operating costs, low levels of domestic growth and reduced consumer demand mean small business confidence is continuing to plummet.

Other domestic concerns surrounding Brexit and the economy were also flagged in the latest Small Business Index from the Federation of Small Businesses.

Pessimism was evident in the fourth quarter, as a fourth consecutive quarterly drop meant the Index stood at -2.5.

That represents a fall from +20.0 during the first quarter of 2017 while 31% of businesses have forecast a fall in performance for the next three months.

In comparison, 27% expect an improvement, which marks only the second time in the last five years that a negative reading was noted (the first was directly following the EU referendum).

The drop in confidence means one in seven small business owners has revealed plans to either sell, close or downsize their firm in the first quarter of 2018.

While some may be involved in merger and acquisition deals, other may consider restructuring methods in order to continue trading.

Those facing the severest financial difficulties could be forced into insolvency, especially as nearly three in four owners have reported a rise in operational costs compared to one year ago.

That figure represents a five-year high and is largely down to increasing labour, utility and input costs, named by 40%, 35% and 33% of business owners respectively.

Profitability has also taken a hit, with more than four in ten firms reporting a drop in profits - you have to go back to 2013 to find the last time the figure was as high.

When quizzed on barriers to growth, 55% listed the state of the economy as a primary concern, suggesting that uncertainty and the poor state of the pound will stifle their ambitions.

One in five said that increased regulation is a further problem while 34% voiced concerns over being able to access skilled staff.

Mike Cherry, the national chairman of the Federation of Small Business, described the number of small business owners seeking to quit as 'troubling'. 

He also pointed to the high levels of finance being withheld from businesses as a result of late payments as another key issue that needs to be overcome.

Rising labour costs are expected to hit the retail and construction sectors heavily in the coming months, with fall in confidence most prominent in those sectors.


By Phil Smith


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