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Scottish small business confidence climbs, but outlook remains weak

New small business research shows that Scottish business confidence grew in the first quarter of 2018, but firms north of the border remain substantially less optimistic than their UK counterparts.  

The Federation of Small Businesses’ (FSB) Scottish Small Business Confidence Index rose to –17.8 points in the first quarter of 2018, up from -21.4 points in the previous three months. Over the same period, the equivalent UK index climbed from -2.5 points to +6.0 points. 

The index measures firms’ expectations regarding whether they expect business conditions to improve or deteriorate.  

FSB Scottish policy convenor Andy Willox said: “It is good to see Scottish business confidence recovering from the near record lows that we saw at the end of 2017. But Scottish firms are still gloomy about prospects, and far less optimistic than the average UK business.”

FSB’s research shows that more than half (55%) of the businesses surveyed identify the condition of the domestic economy as a barrier to growth. Further a net balance of 13.5 per cent of Scottish small businesses reported a fall in revenues over the past three months. 

More positively, a net balance of 4.2 per cent of Scottish smaller firms expect income growth in the coming three months. While the balance of firms looking to increase investment is down slightly on the last quarter, it still shows that a majority of Scottish firms are prepared to spend. 

Andy Willox continued: “If we’re to restore Scottish confidence and turn firms’ investment ambitions into reality, we need to do more to reassure our business community. 

“Last week, valuable details emerged regarding the Brexit transition period. This is a step in the right direction – but as many businesses plan many years in advance, we must see the final Brexit terms as soon as possible.”

This quarter, concerns regarding consumer demand were identified as the second largest barrier to growth for Scottish small businesses. On a UK-wide basis, FSB’s research showed that firms in sectors reliant on consumer spending – such as retailers and hospitality businesses – are markedly less confident.  

Andy Willox said: “Last year, sterling’s depreciation led to a spike in inflation which in turn hurt consumer spending power. Politicians north and south of the border must do all they can to restore consumer confidence, which in turn will help local traders.”