Business confidence falls into negative territory
New research from The Federation of Small Businesses (FSB) shows that UK small business confidence has continued to fall, dipping into negative territory for the first time since 2012. Business owners feeling confident are outnumbered by those that feel the opposite.
However, FSB found many immediate economic conditions improving, with small firms reporting greater access to finance, a rise in new employment and reduced spare capacity in their businesses.
In the first data gathered since the UK’s decision to leave the EU, the FSB Q3 Small Business Index (SBI) found business confidence in negative territory (-2.9). This is the second largest year-on-year fall in confidence in the Index’s history, with the largest drop occurring in the previous quarter of 2016 (Q2). Confidence has now fallen for the last three quarters in a row.
Despite this, FSB found many positive signs of small businesses proving resilient and getting on with the job in hand, in spite of a fragile economic outlook in the longer-term, spurred by political uncertainty caused by the outcome of the EU referendum.
The share of small businesses aspiring to grow over the next 12 months also rose this quarter, now at 55%, the highest level since the end of 2015. The share of businesses expecting to downsize, close or hand on the business fell to 11%.
Small businesses have started to take on new staff, with a net balance of 7% of small firms report increasing headcount this quarter. This is the first time that smaller companies reported an increase in hiring this year. Small businesses also expect this positive trend to continue into the final quarter of 2016.
Credit availability has continued to improve. The SBI credit availability and affordability indices stand at their highest levels since records began at the start of 2012.
Small exporters’ performance has also improved, backed by the weakness in sterling, with more businesses expecting this to rise further in the next three months.
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. The UK small business community seek key domestic policy decisions if we are to grow, to invest, to export and to create jobs.”