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The small business confidence conundrum
Confidence levels in the UK's small businesses community are falling and yet the proportion of businesses planning to grow in the next 12 months has gone up.
The findings of the Q3 Small Business Index from the Federation of Small Businesses (FSB) tally with other recent reports that highlight a yawning chasm between small business confidence and actual business results.
The FSB reports that small business headcount, growth and exports have all risen in the past quarter and access to finance has hit record levels. And the share of small businesses aspiring to grow over the next 12 months has risen to 55%; while the share of businesses expecting to downsize, close or hand on the business has fallen to 11%.
And yet small business confidence has now dipped into negative territory for the first time since 2012 and confidence has now fallen for the last three quarters in a row.
This is the first data gathered by the FSB since the referendum. The FSB says there are signs that businesses are "getting on with the job in hand" and, it says, many firms may have "priced in" the impact of the EU referendum result in advance of the vote.
In addition, the FSB report shows that small businesses are hiring, with a net balance of 7% of SMEs increasing headcount this quarter. This is the first time that smaller firms have reported an increase in hiring this year.
A net balance of 15% of small businesses reported an increase in revenues this quarter, up from 7% at the start of the year. However, this net balance is expected to decline to 9% over the next three months, in line with indications that economic growth is likely to slow later this year.
Mike Cherry, FSB national chairman, said: "Small firms are resilient and will survive the current fragile economic outlook, but to avoid an economic slowdown this data should be a wake-call for our elected politicians. We look to the party conferences and upcoming Autumn Statement to green-light infrastructure projects at local and national level, to simplify the tax system and to help reduce the costs of doing business."
Commenting on the FSB report, Dominic Allon, Europe VP and managing director of Intuit QuickBooks, said: "It was inevitable that the referendum vote would put many small businesses on edge. Small firms have to become even more determined to grow over the next year, and this is the kind of spirit that will help carry them through any testing times ahead. The Government needs to play its part too, however, and planned initiatives to ease tax processes and tackle late payments will prove more important than ever to help small businesses thrive."
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