A growing “confidence gap” is emerging between Scottish small businesses and their counterparts elsewhere in the UK, a new report has shown.
Latest Federation of Small Businesses (FSB) statistics found confidence levels in Scotland fell by more than 10 points between autumn and the end of 2016, from -18.8 to -28.9.
UK-wide, small business confidence has grown, climbing from -2.9 points to 8.5 points in the same period.
The fall in Scotland continues an 18-month decline and the domestic economy is highlighted as the top concern for companies, with 55% citing it as a barrier to growth.
Problems recruiting skilled staff and low consumer demand were also seen as restricting growth. Overall, a net balance 11% of Scottish firms reported reduced staff numbers.
Just under half of 144 Scottish firms responding to the study (46%) said their profits fell in the last quarter of the year while 27% said profits were up, leaving a 19% net balance of Scottish firms with declining profits, compared with 3% UK-wide.
The report states: “While other parts of the UK experienced a resurgence in small business confidence in the last quarter of 2016, Scotland’s firms present a far more pessimistic outlook.
“The Scottish economy may be in for a challenging 2017. A general lack of certainty, both politically and with regards to the future economic environment, is also hampering firms.”
FSB Scottish policy convener Andy Willox said: “A confidence gap has opened up between firms in Scotland and elsewhere in the UK.
“This was clear before the referendum on the EU but widened as 2016 wore on.
“The reasons for this divergence aren’t immediately clear. But new burdens on Scotland’s large service sector, the wider economic impact of the oil price dip and rising overheads will all have had a role to play.
“The Scottish Government has done the right thing by expanding the small business bonus to give smaller firms extra rates help.
“We may need to see the Finance Secretary allocate additional funds to cushion the impact of this year’s revaluation. Longer-term, we need a rates system that doesn’t act as a disincentive to investment.
“Fewer Scottish smaller firms looking to increase their staff numbers is a bad sign, especially in rural Scotland where they provide four in five private sector jobs.
“We’ve pressed politicians to focus on local infrastructure to give local economies a leg up.”
Scottish Conservative shadow economy secretary Dean Lockhart said: “In times of uncertainty, the Scottish Government should be doing all it can to help businesses of all sizes.
“But, instead, it continues to hang the threat of independence over companies who just want to know what the future has in store.
“What’s more, the SNP has embarked upon a number of anti-business measures and, as such, it’s no surprise to see confidence on the slide.”
A Scottish Government spokesman said: “Brexit is by far the biggest threat to Scotland’s jobs, prosperity and economy. That is why we have always been clear that remaining in Europe- and keeping our existing place in the world’s largest single market of more than 500 million people – is the best option for our future. Last month we published a detailed set of proposals in “Scotland’s Place in Europe“ – the first, and so far only, detailed plan for dealing with Brexit to be published by any government in the UK.
“As part of our support for the economy, the Scottish Government announced a package of action to reduce business rates in the draft budget. The Small Business Bonus Scheme will be expanded from 2017 to lift 100,000 properties out of rates completely, while 8,000 business properties will no longer pay the Large Business Supplement, and the overall business rates poundage – the core tax rate that applies to the rateable value of business properties – will also be cut by 3.7% to 46.6p.”