CONFIDENCE among small businesses in Scotland has dropped to a fresh record low in the first quarter amid huge Brexit uncertainty, as declines in revenues and employment accelerated, a key survey shows.
The Federation of Small Businesses’ survey, published today, shows confidence among member firms remains much weaker in Scotland than in the UK as a whole. UK-wide, small business confidence is also in negative territory but not as deeply as in Scotland.
Andrew McRae, FSB Scotland policy chair, noted the much-lower confidence north of the Border might be connected partly to how small businesses in Scotland view Brexit.
The Scottish electorate voted by a significant majority to remain in the European Union in the 2016 referendum.
The FSB’s Scottish Small Business Index (SBI), which measures confidence and was established in 2012, fell by 1.8 points in the first quarter to an all-time low of -34.5. The UK SBI, at -5, is not as bad as the -9.9 in the preceding quarter but it is down by 11 points on the first quarter of last year.
Scottish small businesses have now reduced their overall employment in seven consecutive quarters, according to the FSB survey.
The survey also signals accelerating cost increases for small businesses in the first quarter.
And the proportion of small Scottish firms operating below capacity has increased markedly in the opening three months of this year.
Mr McRae said: “Uncertainty associated with Brexit is being piled upon rising overheads, shaky revenues and squeezed margins. It’s hardly surprising that Scotland’s firms aren’t brimming with confidence.”
He added: “Again, Scottish entrepreneurs are particularly gloomy compared to the UK average. This could be due to the sectoral make-up of the Scottish economy, or how we view the prospect of the UK leaving the EU. Either way, even if we avoid the nightmare of a no-deal, no-transition Brexit, there’s much work to do to give Scottish business decision-makers the confidence they need to grow our economy.”
The FSB noted the proportion of Scottish small business owners planning to downsize, close or hand on their business over the next 12 months was 20.7%, nearly twice the corresponding UK-wide proportion.
Scottish Economy Secretary Derek Mackay said: “It is extremely frustrating to see the impact that the UK’s EU exit, and the continued uncertainty caused by the process, is having on businesses confidence in Scotland. The Scottish Government, along with business organisations, has continued to warn the UK Government about the damage that continued uncertainty is having on Scotland’s economy.”
Mr Mackay noted that the Scottish economy had recorded eight consecutive quarters of growth
The Scottish economy outperformed the UK as a whole slightly in the fourth quarter of last year, according to official data. Gross domestic product in Scotland grew by 0.3% in the final quarter of 2018, Scottish Government figures showed this month. The UK as a whole grew by0.2%. Over 2018, growth in Scotland of 1.4% matched expansion in the UK as a whole.
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