Confidence among small businesses in Scotland has fallen to its lowest level in three years, according to a report from the Federation of Small Business (FSB).
The study examines business sentiment in the final quarter of 2015, and suggests that the widening gap between growth expectations in Scotland and the rest of the UK may be in part due to the decline in the oil and gas industry.
The index shows that confidence in Scotland has fallen from +4.6 points at the end of 2014 to just +0.3, with the UK average standing at +21.7 points.
Trading to stay level
However, SMEs expect trading to remain stable, rather than to worsen or improve. Fifteen per cent of firms reported a rise in revenues during Q4 2015, while just 3 per cent expect their profits to increase through the first three months of this year.
Just under a fifth (19 per cent) of firms said they plan to invest more in the next year, compared with a quarter in Q4 2014, and around a third the year before.
FSB’s Scottish policy convenor, Andy Willox, said: “The creeping gap between Scottish small business confidence and the UK average is a cause for concern.
Many analysts have highlighted the impact of the falling price of crude on Scotland’s oil and gas industry. As you might expect, this decline looks to be having an impact on the local economies dependent upon this trade. Our researchers also suggest that pressure on public sector budgets may be flowing through to private sector confidence.
Regulatory changes a challenge
“Firms face a lorry load of regulatory changes in 2016 – such as new pension requirements and the changes to the minimum wage. Many members tell us that they’ve revisited their business plans as a consequence of these changes. Decision-makers in Edinburgh and London need to be sensitive to the cumulative impact of challenges that small businesses now face.
“In the long term, our objective must be to create resilient Scottish local communities whose strength comes from economic diversity. We cannot allow more places and economies become perilously dependent on a single industry or large private or public employer. Developing resilient local economies must be the key focus of debate at this year’s elections.”