The West Midlands Small Business Index (WMSBI)1, which measures confidence amongst businesses has seen a sharp fall in Q3. It currently stands at -44 when at the last reading in Q2, it stood at -8.
- Confidence in business performance for the next three months falls further, following a significant bounce back during Q2.
- Compared with year-to-date, West Midlands small businesses are less positive about prospects for the next three months.
- Overall sentiment towards revenue is negative, with West Midlands the most pessimistic region in the country in terms of future revenue in next three months.
- Reported revenue in Q3 shows signs of slight improvement since Q1 – however it’s still in negative territory.
- One in four small businesses (27%) in the West Midlands have lost staff over the last three months.
Confidence in future business performance over the next three months has fallen again amongst small businesses in the West Midlands. Future uncertainty due to the COVID-19 pandemic has halted any further confidence increases this quarter, following a significant bounce back during Q2 when progress was seemingly felt.
The uncertainty in confidence witnessed amongst West Midlands small businesses is apparent across the country, with index scores across all regions in negative territory. That being said, West Midlands small businesses report the lowest levels of confidence, when compared to other English regions, and is below the country average of -33.
In Q3, over half (56%) of small businesses in the West Midlands reported a decrease in revenue over the last three months, as the nationwide lockdown had a considerable impact on spending opportunities for consumers. Some resilience was shown by West Midland businesses, however, with 32% reporting an increase in revenue levels over the period.
Close to one in three (29%) West Midlands small businesses expect to increase the amount of capital investment in their business during the coming quarter. However, this is matched by a similar proportion (30%) expecting to decrease investment – leaving the net investment to fall at -1%. This is slightly behind the countries average of +1%, suggesting businesses in the area are on par with sentiment across the UK. London (+5%) and the South West (+11%) are the only two regions in positive figures, where more businesses report an increase in investment over the coming months.
FSB West Midlands Policy Representative Sarah Windrum said: “The West Midlands Small Business Index (WMSBI) shows how small firms in the region continue to be adversely affected by the pandemic, particularly in relation to general business conditions and employment intentions. It’s worrying to see that West Midlands businesses are the most pessimistic across the UK and expect further decreases in revenue and staffing levels in the next quarter. It is therefore crucial businesses are given confidence and certainty at this time, particularly for businesses most in need of support in the hospitality, retail and tourism related sectors and not forgetting those in working in the supply chains.
“Small businesses have followed the guidance, protected the health of their staff and customers, and invested in making their business COVID-safe. The announcement of a second lockdown, however necessary, will inevitably leave many small firms facing the bleakest winter they have ever seen and the second deep recession in twelve months. Urgent clarity is needed on how small businesses and the self-employed will be supported through this.
“We welcomed the Chancellor’s enhancement of existing schemes last week, along with the extension of furlough scheme, but we are now calling for fresh interventions to help those that have received no income support to date, reduce the costs of hiring, further alleviate the business rates burden and provide more resources for those looking to start-up for the first time.”
“Too many are still without the help they need to weather current disruption – not least company directors, the newly self-employed, those without premises and those further down supply chains in the retail, leisure and hospitality sectors. An ambitious rescue package for these groups is urgently needed. West Midlands Local authorities should use the new discretionary funds being allocated this week to assist them wherever possible.”
“With the unemployment rate rising, we’ll need to encourage more of those who are out of work to strike out on their own over the months ahead. A Kickstart Start-Up programme, inspired by the Kickstart employment initiative and building on the success of the Start-Up Loans and the New Enterprise Allowance programmes, could mark a way forward.
“Equally if we want small business owners to create jobs, we have to bring down the costs of employment, starting with Employer National Insurance Contributions. If we want them to invest, innovate and expand, we have to alleviate the strain of wider government-imposed overheads, including those stemming from an outdated business rates system which continues to stifle too many community businesses all over the country.
“Now that support measures are continuing through to the Spring, we should also avoid a scenario where businesses suddenly go from going from paying 0% to 100% of their business rates bills in April. And help should be expanded to the wider business community and supply chains.”
 The West Midlands Small Business Index is a weighted index of the responses to the question: ‘Considering your overall business performance, and ignoring any normal seasonal variations at this time of the year, how do you view business prospects over the next three months, compared with the previous three months?’ The share of firms reporting ‘much improved’ are given the following weightings: +2, slightly improved +1, approximately the same 0, slightly worse -1 and much worse -2; the Small Business Index is derived from the sum of these factors.