SCOTTISH businesses are continuing to see profits squeezed because of rising costs linked to the collapse in sterling since last year’s Brexit vote.

A net balance of 16 per cent of firms reported a fall in gross profits during the first quarter, the latest report on business confidence from the Federation of Small Businesses (FSB) has found. The depreciation of sterling since the vote, which has led to higher prices for imported goods and services, was signalled by the survey to have been a key factor behind the profits squeeze.

Published by the FSB today, the survey shows business confidence in Scotland continues to lag the UK average – even though confidence has been falling across the UK in the last three months.

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The FSB’s latest business confidence index for Scotland showed a reading of -3.8 per cent, compared with -9.6 per cent in the previous quarter. It means it is now two years since the report found a majority of Scottish firms were confident conditions were set to improve. The UK reading was +15 points for the first quarter, compared with +20 at the start of the year.

FSB Scottish policy convener Andy Willox said the figures hammer home the need for the new UK Government to put small business and the self-employed at the heart of its programme. Mr Willox called for employers to be reassured over the future of their EU workers and urged the Government to not revive recently-axed plans for tax increases on the self-employed.

Mr Willox said: “A majority of Scottish businesses have been gloomy about their prospects for two years. While, over the course of 2017 a growing share of Scottish firms have shaken off the economic blues, we can’t dismiss this long-term trend.”