IT was easy this week to come up with an appropriate soundtrack for the post-Brexit vote survey by the Federation of Small Businesses of confidence among its members in Scotland - a 1972 hit from Johnny Nash.
The American artist had more than one big hit that year – with ‘There Are More Questions Than Answers’ and ‘I Can See Clearly Now’ among his releases. Answers on a postcard (as they said in the 70s) as to which of these two hits should have been playing in the background this week as the FSB revealed its members’ assessment of the altered economic landscape. The FSB survey showed a plunge in confidence among Scotland’s small businesses, which make such a crucial contribution to the economy, in the latest quarter.
Read More: FSB: Scottish business confidence plunges after Brexit vote, job cuts flagged
In the wake of the UK electorate’s June 23 vote to leave the European Union, the Scottish small business index, which measures confidence, plummeted to -18.8. This signals a significant majority of firms believe the trading environment will deteriorate. The index is down from -5.5 in the preceding three months, and from +1.7 in the third quarter of 2015.
This plunge in confidence seems to have resulted in large part from the lack of answers from the Conservative Government to pretty much anything at all when it comes to the UK’s future relationship with the EU. Worryingly but not surprisingly, given the tumble in confidence, small businesses in Scotland are signalling they will cut their overall employment in the coming three months.
Future trade with continuing EU member states and what the Brexit vote means for non-UK EU nationals working in Scotland were chief among the concerns of small businesses north of the Border, FSB spokesman Stuart Mackinnon noted.
These are entirely justified, and perfectly understandable, concerns, particularly given the unrelenting impression that members of the Conservative Government have little idea of what they are trying to achieve by way of a Brexit deal, let alone how they might start to go about it.
Mr Mackinnon, for his part, is to be commended for his common-sense response, when asked whether he was surprised or disappointed by the FSB’s latest Scottish survey results.
He said: “I think, given the political and economic instability...I would have been surprised if confidence had increased but, given the summer we have had, it is perhaps to be expected you would see fewer small businesses confident about the future.”
Mr Mackinnon declared it was the job of policy-makers to persuade businesses they had a “strong plan” for the future of the UK, and gave his view that there was “a lot of work to be done” on this front. He is not kidding. There is a huge amount of work to be done.
And, for all the fawning over what some perceive to be a strong leadership style from Prime Minister Theresa May, even the keenest observers would be struggling for a glimpse of anything that even vaguely resembles a credible plan.
The Conservatives appear to have been trying to shift the narrative. They seem now to be trying to persuade people that it is not that they do not have a clue of what to do after the Brexit vote but rather it is just that they want to keep their strategy a bit under wraps to somehow preserve negotiating power. They talk of not giving a running commentary, and giving after-the-event updates. This new narrative is no more convincing than that in the immediate wake of the Brexit vote.
A survey by Ipsos Mori this week shows that, three months after the Brexit result, 53 per cent of Scottish voters believe leaving the EU will have a negative impact on the UK economy. Only 21 per cent believe it will have a positive effect. This indicates clearly that Scottish voters, who preferred by a significant margin on June 23 to stay in the EU, are largely unimpressed by the evolving Conservative narrative. So it is hardly surprising the independence debate is raging again.
It was also interesting this week to see the Organisation for Economic Cooperation and Development, the Paris-based think-tank, cut its forecast of UK growth for next year from an already below-trend two per cent to just one per cent.
The FSB survey found 63 per cent of small businesses in Scotland now view the performance of the UK economy as a barrier to growth, up from 46 per cent three months ago. A survey published this week by insurer Zurich concluded small and medium-sized enterprises across the UK have had a “tumultuous” time since the Brexit vote.
What is particularly interesting in both of these surveys is that firms in Scotland appear to be taking the vote to leave the EU far harder.
The FSB’s UK small business index fell to -2.9 in the latest quarter, from +4.3 in the preceding three months.
In Zurich’s survey, 53 per cent of Scottish SMEs voiced fears about international trade risks, including sanctions and regulation, stemming from the Brexit vote. This was even higher than the sizeable 44 per cent of UK SMEs raising this as a key concern.
Meanwhile, 73 per cent of Scottish SME owners and decision-makers said they would vote Remain now, even higher than the corresponding 55 per cent in the UK as a whole.
This seemingly greater dismay, worry and loss of confidence over the EU exit vote north of the Border probably reflects the fact that Scotland is a small, outward-facing economy, but may also show a greater awareness of what is likely to come next for the UK economy.
Whatever the cause, it is a deeply concerning situation at a time when the oil and gas industry’s woes are taking a heavy toll on the Scottish economy.
It would be good to see some indication from the Conservative Government over how, exactly, it proposes to sort out the post-Brexit mess facing Scotland’s small businesses. If it is not too much of a secret.
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