Small business confidence falls first time since 2012

Morale among small to medium sized businesses fell for the first time in four years, an industry body said on Thursday, due to concerns about the future of the British economy.

A survey from the Federation of Small Businesses (FSB) found that in the first three months to the end of August, since the country voted to leave the European Union, business confidence dipped into negative territory for the first time since 2012.

However, the survey of 1,035 small firms, found that immediate economic conditions were improving as small firms reported greater access to finance, a rise in employment and reduced space capacity in their business.

The small business index found that confidence fell -2.9, which is the second largest year-on-year fall in the index’s history.

Business confidence fell for the last three quarters in a row.

Although, the report said businesses may have ‘priced-in’ the impact of the EU referendum result and were now looking for opportunities to grow.

In the quarter, 55% of small business said they hoped to grow in the 12 months, the highest level since the end of 2015, but the number of businesses expected to downsize, or close, fell to 11%.

The survey found that 7% of small businesses increased staff, the first time small companies reported an increase in recruitment this year, and they expect the trend to continue in the final quarter of 2016.

About 62% of small businesses said the British economy was a barrier to growth aspirations in the third quarter, up from last year with 49%. However, this was only slightly higher than the 58% seen in the first and second quarter of 2016, which suggested that it could not be due to the EU referendum result.

FSB chairman Mike Cherry, said the low pound and the resilience of consumer demand had prevented a fall, but it had only concealed issues limiting growth which would reappear over the next six months.

He said: “There is no doubt that the political shock of the Brexit result has taken place at a time of weakening business confidence. For the first time in four years, confidence is in negative territory. This persistent downward trend in UK business confidence reflects underlying issues that predate the Brexit decision.”

“Small firms are resilient and will survive the current fragile economic outlook, but to avoid an economic slowdown this data should be a wake-up call for our elected politicians.”

Cherry said that the Chancellor Philip Hammond should use the autumn statement in November “to back infrastructure projects at local and national level, to simplify the tax system and to help reduce the costs of doing business”.

In August, the Confederation of British Industry reported that small and medium sized manufacturers said they could experience a fall in orders in the final quarter, and suggested that business optimism had fallen at its fastest rate since January 2009 due to the Brexit vote.