The Federation of Small Businesses (FSB) Small Business Index (SBI) measure has hit the lowest point since the last recession
The UK’s small business community were pessimistic about heading into the new year without certainty on Brexit, and concerns about the future direction of global trade and rising employment costs continue to weigh on sentiment, according to FSB’s latest Small Business Index which surveyed 1,029 small businesses for Q4.
The confidence measure stands at -21.6 in Q4. This marks an unprecedented sixth straight negative reading, and the lowest quarterly figure since the same period in 2011 when the UK was mid-way through a recession.
Close to half (46%) of small firms expect their performance to worsen over the coming three months. With fewer than a quarter (24%) expecting their performance to improve.
The last three months have also seen margins squeezed within small businesses, according to the study. The proportion reporting a decrease in profits (42%) has surged to a five-year high, while the share reporting an increase (27%) is at a five-year low.
FSB director of external affairs and advocacy, Craig Beaumont said: ‘The small business community has been stifled by uncertainty for more than three years. This quarter, the added uncertainty that accompanies a general election made it even harder for small firms to plan, hire and increase profits.
‘They say that the night is darkest before the dawn, and small firms will be hoping that the old adage holds true. The incoming government has made some very positive commitments to the small business community – particularly where connectivity, employment costs, business rates and late payments are concerned – it now needs to deliver.’
Another frequently cited barrier to growth is labour costs - one in four (24%) refer to them as an impediment to growth, up 3% compared to this time last year.
This will be exacerbated by the increase in the national living wage which will come into effect in 2020.
Only 11% of small firms are planning to increase headcounts next quarter, a figure which has hit a five-year low.
Beaumont added: ‘The fact that we are seeing hiring intentions drop-off so dramatically is a real concern. The need for this government to deliver on its promise to cut the jobs tax by increasing the employment allowance is a very urgent one.
‘The small business community should be kept front and centre when ironing out our future relationships with the EU and other countries across the globe.
‘We must secure a pro-business future trading arrangement with the EU, one that protects the three t’s: trade, talent and transition.’