SME confidence falls to its lowest level in three years
Small business confidence has fallen to its lowest level since the first quarter of 2013, according to the latest Voice of Small Business Index published by the Federation of Small Businesses (FSB).
Small firms also saw the first decline in job creation since Q2 2013 while exports posted their weakest performance since 2012. Profitability has declined, with more small businesses reporting that their profits had declined rather than grown over the past three months.
This is despite the fact that revenues had risen in that period, suggesting that more small businesses were operating on tighter profit margins at the start of 2016. A sustained fall in profits could leave some small businesses facing serious problems and even the prospects of corporate insolvency.
More than a third (34.8%) of businesses surveyed said that they expected to see their business performance decline in the coming months. This was the main driver in the overall drop in business confidence.
According to the FSB, there are a number of factors currently having a negative impact on business confidence. There’s a large degree of uncertainty – increased by the impending referendum on EU membership – regarding the UK and the wider global economy.
Some other new Government measures are also being seen as bring additional pressures to bear on UK small businesses. These include the introduction of the new National Living Wage, pensions auto-enrolment and changes to the dividend tax relief system.
Small business confidence has declined in every UK region compared to the same time last year. Falls were particularly marked in London and the East of England. Falling confidence in the capital tends to be closely linked to concerns about the wider global economy.
Confidence entered negative territory for Scotland and Northern Ireland. According to the FSB, the Scottish economy had been severely impacted by falling oil prices while Northern Ireland has a high dependence on public sector jobs. This is a concern during a period of austerity when there are continuing job losses and an environment of pay restraint within the sector.
By Phil Smith