Rising costs causes confidence drop for small Scottish businesses

Confidence among small businesses in Scotland has fallen (iStock)

CONFIDENCE among small businesses in Scotland has plummeted amid rising costs, according to a new survey.

The latest index from the Federation of Small Businesses (FSB) found business optimism in Scotland fell to -15.2 points in the third quarter of the year, from -3.8 points in the previous three months.

Over the same period the equivalent UK figure dropped 13.9 points to +1 point.

FSB Scottish policy convener Andy Willox said: “Businesses in Scotland have been pessimistic about prospects for the last seven quarters. While we saw a slight uptick earlier this year, this quarter business confidence in Scotland, and across the UK, has taken a hit.

“Rising inflationary pressure and a weakening domestic economy are the twin drivers of plummeting confidence among UK businesses.

“Scottish small firms will be looking to the Chancellor to extend a lifeline at the Budget. In such a difficult trading environment, new tax grabs and loss of reliefs for entrepreneurs will exacerbate existing challenges.”

The survey found a net balance of 7% of Scottish smaller firms reporting a fall in gross profits, with a higher proportion of firms warning that input costs, such as the price of raw materials, are a barrier to business growth.

“The depreciation of Sterling is still having a big impact on those firms which import goods or services, or who are part of international supply chains,” Mr Willox added.

However a net balance of 7% of small businesses also plan to increase their investment in the next quarter, up from 6% earlier in the year.

The FSB in Scotland has called for measures to cushion the impact of Brexit on Scottish businesses.

Mr Willox said: “It is critical that agreement with the EU27 is now reached on issues such as the length and nature of a transitional deal.

“We would argue that a three year interim period would be sensible, alongside a comprehensive Free Trade Agreement. Further, EU citizens working in or running businesses in Scotland must have the right to remain in the country.”