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Scottish business confidence slides as no deal concern mounts

Scottish small business confidence has fallen sharply and businesses north of the border are amongst the most concerned in the UK about a no deal Brexit, new figures from the FSB show.

In the third quarter of 2018, FSB’s Scottish Small Business Confidence Index fell from +5.1 points to -13.2 points. UK-wide, the Index, which measures business owners’ assessment of business conditions, fell from +12.9 points to -1.7 points.  

A separate FSB survey shows that 56 per cent of Scottish businesses believe a no transition, no deal Brexit would impact negatively on their business, whereas only 5 per cent believe it will have a positive impact. Of the remainder, 27 per cent of Scottish businesses believe such a move would have no impact, while 12 per cent of enterprises said they didn’t know. 

Across the UK, 48 per cent of firms stated that they believe a no deal Brexit would impact their operations negatively. Only businesses in London have more significant concerns about a no deal Brexit than Scottish traders.  

FSB Scotland Policy Chair Andrew McRae said: “The slide in business optimism over the last three months is perhaps unsurprising given the very public debate about the future of the UK outside of the EU. 

“If you sell your products to the EU, buy goods from the EU or if your business relies on staff from the EU, you’ll likely to see a no deal Brexit as a significant threat to your business.

“Businesses in Scotland are more likely to have concerns about this outcome.”

Only one in seven (14%) Scottish and UK small businesses have starting planning for a no-deal Brexit, the research shows. Almost a third (31%) of Scottish businesses say they plan to decrease investment ahead of March 2019. Further, the Index also shows Scottish businesses reporting pressure on revenues and profits, alongside a spike in overheads – with the cost of fuel cited by many.    

The Index states: “While it is unclear exactly what role the Brexit negotiations is having on confidence levels, it would be surprising if the uncertainty around markets, supply chains and staffing was not feeding through to consumer and business sentiment.”

Andrew McRae said: “Given the lack of clarity around future trading arrangements, it’s understandable that most Scottish small businesses haven’t yet starting preparing for a UK outside the EU.

“What’s more worrying to see is the number of firms planning to postpone investment because of the associated uncertainty. We also see falling revenues and profits, compounded by rising utility and fuel costs. 

“The last three months of 2018 provide an opportunity for key decision makers to put our smaller business on a steadier footing. We must prepare our smaller firms for any change in trading conditions. They must do what they can to tackle spiralling overheads. We can’t crash out of the EU into a high-cost, low margin trading environment.”