Confidence among small Scots businesses hits three-year low

There is danger of being a north and south divide when it comes to small businesses in the UK. Picture: Stuart Cobley

Small business confidence levels north of the Border have sunk to a three-year low, according to a report out today which also raises wider concerns over a north-south economic divide.

The study by the Federation of Small Businesses (FSB) shows a widening gap between Scottish business growth expectations and the UK average. Only a slim majority of firms in Scotland expect prospects to improve.

The report is the latest blow for the economy after it emerged last week that distress levels among Scottish businesses had jumped while falling elsewhere in the UK. That followed the news that Scottish GDP had grown by just 0.1 per cent in the third quarter of last year – a quarter of the rate for the UK as a whole.

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Today’s research by the FSB suggests that the fall in business confidence in Scotland may be due, in part, to the decline in the oil and gas industry filtering through to the wider economy.

Small businesses form the backbone of the private sector north of the Border and the study polled more than 360 of them, out of 3,000 quizzed UK-wide.

The FSB’s Scottish confidence index now stands at +0.3 points, down from +4.6 at the same stage last year, and markedly below the UK figure of +21.7. Though the weakest reading since the start of 2013, it suggests that Scottish small businesses expect the trading environment to remain about the same, rather than improving or getting worse.

FSB Scottish policy convenor, Andy Willox, described the gap between Scottish business confidence and the UK average as “a cause for concern.

He said: “Many analysts have highlighted the impact of the falling price of crude on Scotland’s oil and gas industry. As you might expect, this decline looks to be having an impact on the local economies dependent upon this trade.

“Our researchers also suggest that pressure on public sector budgets may be flowing through to private sector confidence.”

Willox added: “Firms face a lorry load of regulatory changes in 2016 – such as new pension requirements and the changes to the minimum wage. Many members tell us that they’ve revisited their business plans as a consequence of these changes.

“Decision-makers in Edinburgh and London need to be sensitive to the cumulative impact of challenges that small businesses now face.”

The FSB said smaller companies in north-east England, Yorkshire and Wales had also reported a fall in confidence in the past year.

Chairman John Allan added: “A clear divide in confidence is now emerging across different parts of the UK.”