Skip To The Main Content

Small business confidence hits one-year high as profits recover

  • Quarterly Small Business Index (SBI) continues steady rise to reach highest point since Q2 2017 
  • Women entrepreneurs now more confident than male counterparts  
  • Welsh small firms are UK’s most bullish, while retailers suffer and GDPR feeds regulatory concerns     

graph

Confidence among the UK’s small business community has risen in recent months and now stands at a one-year high, according to the latest SBI from the Federation of Small Businesses (FSB).

The UK SBI stands at +12.9 in Q2 2018, up considerably from the +6 seen in Q1 and the highest reading since Q2 2017 (+15). More than a third (35%) of small businesses expect their performance will improve over the coming three months. Less than a quarter (24%) believe performance will worsen. 

The proportion of small firms saying that gross profits are steady or increasing (62%) is also at a 12-month high, as is the share of exporters who report that international sales are stable or rising (81%).

Growth intentions are at their most promising since Q2 2017, with the vast majority of small firms (88%) planning to remain the same size or expand in the coming 12 months. More than three quarters (79%) report steady or increasing headcounts.

In a reversal of a previous trend, female small business owners are now more confident than their male counterparts. The SBI for women and men stands at +16 and +12 respectively in Q2 2018, compared to +10 and +17 respectively at this time last year.

FSB National Chairman Mike Cherry said: “It’s good to see small business confidence continuing its steady rise this month. We hear a lot of talk about the impact of uncertainty on the economy. Actually, there’s plenty that small firms can be certain of: progress on Heathrow expansion, increasing consumer spending power off the back of rising wages and a much-anticipated new export strategy from the Government.

“Small business owners are resilient. They won’t be put off by the doomsayers.

“Many women in business still face an uphill struggle, not least when it comes to securing investment. Visibility of role models is one issue, and we’re working hard to address that challenge. On the other hand, thousands of women in business are going from strength to strength. It’s good to see that reflected in today’s report.”

Following the introduction of the General Data Protection Regulation (GDPR) in May, the proportion of small firms saying that regulation is a primary barrier to growth has surged 10 percentage points to 29% since this time last year.

The domestic economy (57%) remains the number one barrier to small business growth, with access to appropriately skilled staff (28%) and labour costs (21%) also frequently flagged.

Mike Cherry continued: “It’s vital that the Information Commissioner’s Office takes a proportionate approach to enforcing the GDPR. Small firms don’t have big legal teams and that needs to be recognised. Small businesses definitely shouldn’t be fined for honest mistakes.

“A lot of eyes in Westminster are understandably still on Brexit. However, policymakers need to remember that it’s weak domestic growth, late payments and access to the right skills here at home that are front of mind for a lot of small firms.”

Welsh small businesses are the UK’s most confident this quarter, reporting an SBI of +44. Elsewhere, the SBI for Scotland (+5) has returned to positive territory for the first time since 2015. The most confident regions in England are the East Midlands (38%) and Yorkshire (34%). The least confident are the South West (-2%) and the North West (2%).

Confidence among small retailers remains in negative territory (-2%). Small firms in the manufacturing (27%) and professional, scientific and technical sectors (23%) remain among the most confident.

Mike Cherry added: “It’s great to see Scottish small business confidence back in the black after a challenging few years.

“While England’s north/ south divide is discussed a good deal, we hear less about its east/ west divide. More needs to be done to improve connectivity across the width of the country, as well as the length of it.

“Though the Beast from the East has now left us, retailers are still well and truly under the cosh as they try to absorb rising business rates, wages and pension costs. Our high street shops need more support when trying to absorb these expenses. An increase in the Employment Allowance to £4,000 is overdue.

“Equally, we need to rebalance the taxation system. As things stand, you have rates going up while corporation tax is coming down. If we want to breathe life back into our high streets, that needs a rethink.”