There are fears of further distress and closures across the hospitality sector following revelations that confidence fell over a cliff during the critical period covering the festive season.
The latest quarterly small business index released today by the Federation of Small Businesses (FSB) shows that accommodation and food service was by far the gloomiest sector in the final three months of last year with a confidence reading of minus 73 points, down from negative 31.1 points in the third quarter. Retail also saw a deterioration from minus 22.8 to minus 29.8 points.
READ MORE: Scottish shops 'staring down barrel' of business rate hikes
“With small hospitality firms reporting a big fall in their confidence, there are fears of yet more distress and closures among this sector, so vital to community spirit and our social fabric," FSB policy chair Tim McKenzie said.
"The help extended to small firms in the retail, leisure and hospitality sectors at the Autumn Statement via an extension of business rates relief is a welcome start, and will mitigate their tax burden later this year, but right now things are tough."
Retail, leisure and hospitality firms in England and Wales are set to benefit from a continued 75% relief from business rates in the coming financial year. However, rates relief in Scotland has been limited to hospitality outlets on the islands, and capped at £110,000 per business.
The FSB said confidence across all types of small businesses slammed into reverse in the final quarter with an overall reading of minus 15 points, down from minus 8 points in the previous three months and similar to the negative reading of 14.2 in the second quarter.
The domestic economy was perceived as the largest barrier to growth, cited by more than three-fifths of those surveyed, with a lack of consumer demand the second most widely cited.
READ MORE: Hospitality hopes dashed by Scottish Government Budget blow
Indications of cost pressures eased somewhat, but 82.5% of small firms still reported that the price of doing business was higher in the fourth quarter than in the same period a year earlier.
Of the factors driving up costs, utilities were the biggest to blame according to 62.5% of those questioned. Labour costs regained the second-place spot, cited by 45.7% of firms, up from 42.8% in the third quarter. Tax costs also ticked upwards from 19.7% in the third quarter to 24.2% in the fourth, the highest proportion since the beginning of 2022.
Among small exporters there were mixed results in the fourth quarter with 26.1% saying they grew their exports during the period, up from 24.4% in the third quarter. However, there was also a jump in the proportion who reported a fall in exports, up from 26.9% to 36.9%.
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