A gap in confidence is growing between businesses in Scotland, north east England and Wales and those in the Midlands and the south of England, according to the Federation of Small Business (FSB).
In its latest small business index (SBI), which examines business confidence among the UK’s SMEs during Q4 2015, the Federation has revealed that although job creation, increasing revenues and improving productivity spells good news as a whole, firms in north east England, Scotland and Wales risk being left behind.
Over the last year, small firms report a year-on-year confidence decline in the north east, Yorkshire and Scotland, as well as in Wales, where confidence has fallen to negative figures for the first time in two years.
North of the border in Scotland, confidence is at its lowest since Q1 2013. In other areas, levels remain stable, in large part due to technology firms and business/professional services.
- Overall UK confidence stands at 21.7 points, an increase of 4.1 points compared with the same period in 2014
- More than half (59 per cent) of businesses expect growth
- Almost a quarter (24 per cent) report a growth in revenue in the previous three months – the highest since 2010.
- Productivity hit 3 per cent – doubling in the previous year to reach an all-time high
- SMEs lead the way on job creation, reporting that they expanded their staff since Q3 2015 and more planning to do so in spring
- Spare capacity is at its lowest since reporting began, suggesting small firms expect a rise in interest rates later this year
- Nearly one in four (22 per cent) report tax burdens as the biggest barrier to growing their business, up from one in six (16 per cent) 12 months before.
Imposed changes a concern
FSB national chairman, John Allan, commented that picking up the pieces from the recent flooding is “likely to further weigh on business confidence in the north”, while factors such as the impending National Living Wage, pension auto-enrolment, and proposed mandatory quarterly tax reporting are a concern for SMEs across the country.
He said: “A clear divide in confidence is now emerging across different parts of the UK, with businesses in the south and in sectors like technology and professional services feeling more positive about 2016.
“Although confidence is patchy across the UK, small businesses continue to show they are resilient, leading the way on employment growth and productivity.
“Increased productivity and stable economic growth are helped by a low inflation environment. This increase is the sixth consecutive quarter of rising productivity. It is clear that small firms are improving their use of capital equipment, providing better staff training and finding new ways to be more efficient.”
He added that ministers should be “sensitive to the cumulative impact of challenges that small businesses now face”.