CONFIDENCE levels among small businesses in Scotland have fallen for a second consecutive quarter, and remain adrift of the UK average, a survey has revealed.

A Scottish spokesman for the Federation of Small Businesses, which conducted the survey, expressed disappointment that confidence among firms north of the Border had trailed the UK average again in the fourth quarter.

Stuart Mackinnon, senior public affairs adviser at the FSB in Scotland, noted confidence among small business owners north of the Border had exceeded the UK average in the second quarter but fallen behind in the three months to September.

He said: "I think we always see confidence dropping towards the end of a calendar year but it is disappointing to see two consecutive quarters where Scotland has trailed behind the UK average."

He added: "In quarter two, we actually saw Scottish confidence rise to become higher than the UK average. In quarter three, we saw a steep drop. In quarter four, we see another steep drop."

The FSB's latest quarterly survey, published today, shows that the Scottish Small Business Index, which measures confidence, came in at plus-4.6 points in the fourth quarter, down by 21 points on the preceding three months. The index had stood at plus-44 points in the second quarter.

The FSB noted the fourth-quarter confidence reading was more than 10 points adrift of that for the same period of last year. This marked the first year-on-year decline in confidence among small businesses in Scotland since the start of 2013.

The index reading for the UK as a whole dropped to 17.6 points in the fourth quarter, from 41 points in the preceding three months, but remained well above that for Scotland.

Mr Mackinnon took some comfort from the fact the Scottish index was still in positive territory. The proportion of Scottish small businesses expecting their prospects to improve over the coming three months continued to exceed the percentage anticipating a deterioration, although to a significantly lesser extent than in the previous survey.

While 32 per cent of Scottish small businesses believed their prospects would improve over the next three months, 25 per cent forecast things would deteriorate.

Mr Mackinnon said: "We are in positive territory but we need to pay close attention to the strength, and it is concerning to see that Scotland, Wales, Northern Ireland, and the north of England are doing so much poorer than London and the south-east."

Asked why Scotland might be trailing London and south-east England, he replied: "I think we can probably recognise there might be sectoral issues. What we see is most confidence in buoyant sectors [such as those] related to new technology.

"Certainly, there is a very strong technology hub in London and the south-east. Business services continues to track highly, as does financial services. Whether or not it is London and the south-east has a much higher density of these businesses, these sectors that are doing well, that that is the reason we are seeing these regional imbalances."

The FSB highlighted its survey finding that its members in Scotland regard consumer demand as the biggest barrier to growth.

The survey also shows that small business owners have major concerns over the state of the UK economy.

Respondents signalled overall employment levels in the Scottish small business sector were likely to decline over the next three months.

Fewer small businesses in Scotland achieved a rise in turnover over the last three months, the survey showed, although profitability increased amid an easing of fuel costs.

Noting that the quarterly survey generally showed a decline in confidence at this time of year, Mr Mackinnon said: "We ask members to try to seasonally adjust [their responses] but prevailing seasonal conditions do get added to the mix when they are making a judgment."