Small business confidence tumbles ahead of Brexit vote

Date: 10 December 2018

Small business confidence tumbles ahead of Brexit voteConfidence among UK small firms has fallen to its lowest point since 2011, according to new data from the Federation of Small Businesses.

The latest quarterly Small Business Index (SBI) stands at -9.9 in Q4 2018, reflecting "a level of pessimism not seen since the aftermath of the financial crash", according to the FSB.

More than four in ten (43%) small businesses expect their performance to worsen over the coming three months, up from 30% in the summer.

The proportion of small exporters expecting international sales to fall next quarter has "soared to a four-year high", surpassing 30% for the first time in that period. The figure is up 14 percentage points compared to Q4 2017.

With EU net migration to the UK at a six-year low, skills shortages are intensifying. The number of small firms citing lack of access to appropriately skilled staff as a barrier to growth has risen to 36% - the highest share since the beginning of 2015.

More than two-thirds (67%) of small firms do not expect to increase capital investment in the coming three months and one in seven (15%) is planning to actively decrease investment. The figure is at its highest since Q3 2016 as businesses pause expansion plans amid unprecedented uncertainty.

"We've not seen political uncertainty weighing on small business confidence like this for many years," said FSB national chairman Mike Cherry. "Planning ahead has now become impossible for a lot of firms as we simply don't know what environment we'll be faced with in little more than 100 days' time.

"A pro-business Brexit is one that ensures we can trade easily with the EU and have access to the skills we need. The latter is already proving a challenge and - if we crash out of the EU on 29 March without a deal - the former will go out the window.

"Politicians of all stripes need to take account of the UK small business community's mounting concern; the economic warning signs are now flashing red. MPs should talk to their local business community before the upcoming meaningful vote and be ready to act to protect the small firms which employ 16 million people."

It's not all doom and gloom, however. The findings show that small businesses are continuing to hire new personnel, with 16% taking on a member of staff in the past three months.

In addition, 68% have increased pay compared to last year, significantly more than in the same period in 2017 (58%). Almost one in three (29%) have increased wages by 4% or more. And half of small firms still aspire to grow their businesses over the next 12 months, a figure that is largely unchanged since this time last year.

Mike Cherry said: "These figures are testament to the resilience and grit of small business owners right across the UK … There is a huge amount of drive and ambition among our small businesses. If they're given certainty and the support they need, their full potential can be realised."

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