Downbeat FSB Confidence Figures Underlines Case for EU Answers

04/07/2016 - Scottish small business confidence was in decline in the months before the EU referendum vote, according to the Federation of Small Businesses’ (FSB) latest study.

For the second quarter in a row, the FSB’s confidence index shows that Scottish business owners who expect trading conditions to deteriorate outnumber those who believe they will improve. FSB argues that governments in Edinburgh and London need to take action to reverse this trend.

Last week at a post-referendum business summit convened by the UK Government, FSB pressed for clarity in key areas of importance for the small business community such as access to European markets.

Now, FSB says that Scottish Government ministers may need to deploy extra advice and help for firms grappling with the consequences of Brexit. The FSB proposes a new specialist unit which would advise businesses and monitor their feedback. If it picked up on widespread problems – with, for example, business credit or staff recruitment – this unit could also propose solutions to ministers.   

Andy Willox, FSB’s Scottish policy convenor, said: “These figures show that small business confidence was already shaky ahead of the EU vote.  Now that the UK is set to leave, businesses need to know what it will mean for them in practice.

“While legally nothing has changed since last week, the markets in which businesses operate are already in motion. For example, currency fluctuations will have had a big impact on importers and exporters.

“FSB has pressed the UK government on areas of crucial importance for our members and the wider small business community. We’re now asking the Scottish Government to do what it can to provide clarity to business and keep a close eye on emerging issues.”

The FSB’s Scottish Small Business Confidence Index fell to -5.5 points in the second quarter of 2016, down from +28.5 points this time last year. The UK figure also dropped sharply to +4.3 points this quarter, compared to a high of +37.9 points in the second quarter of 2015.

The study also reveals a declining proportion of businesses expect profits and revenues to grow, while hiring intentions for the next quarter are very subdued. Further, while a net balance of 7% of Scottish companies expect to increase their capital expenditure over the next year, this is well down on the equivalent figure of 19% recorded at the start of 2016. 

Andy Willox continued: “As a consequence of, among other things, the decline in the oil and gas industry and well-documented pressures on our service sector, Scottish small business confidence has been very weak for the last year.  At the moment, it’s hard to see the current economic uncertainty making it easier for confidence to bounce back quickly.

“While most Scottish firms are simply getting on with business, that doesn’t mean that they are indifferent to the outcome or implications of the referendum.  It is vital that the UK Government makes it a priority to explain, at the very least, what is going to happen to our access to the £9 trillion single market and the free movement of people.”

Source: FSB Scotland