Confidence among small Scots firms hits three-year high

The Scottish small business confidence index (SBI) from the Federation of Small Businesses (FSB) climbed from -17.8 points to +5.1 in the second quarter of this year.

While the UK SBI also grew over the last three months from +6 points to +12.9, the gap in optimism between Scottish and UK firms is at its lowest since the second quarter of 2014.

Nonetheless, Scottish firms reported a decrease in both profits and revenue over the past three months.

And four in five reported rising business costs this quarter, with FSB’s research highlighted the rising cost of fuel, utilities and regulatory compliance, and rising overheads seen as hindering business’ growth.

However, the research predicts that Scottish businesses’ profitability and turnover will improve over the next quarter.

FSB Scotland policy chairman Andrew McRae said: “For the first time in years, Scottish smaller firms are quietly confident about business prospects. As a consequence, the average Scottish firm is now almost as positive about the future as the average UK business.”

He said it is difficult to pinpoint the reasons for change, but cited anecdotal evidence that tourism firms are expecting a successful summer, and in oil and gas are facing “kinder” trading conditions.

McRae added: “Whatever the reason, Scotland’s decision-makers need to nurture this newfound optimism.

“That means delivering on promises to improve the country’s digital infrastructure and talking up the power of local business to drive growth and create opportunities.

“It also means Scottish Government ministers instructing our public agencies to prepare the country for the economic consequences of Brexit.”

He added: “Getting our local economies moving is a top priority for the FSB in Scotland. We could do worse than ensuring that our public sectors uses every pound it spends in a way that boosts neighbourhood businesses.”

FSB national chairman Mike Cherry also welcomed Scottish small business confidence “being back in the black after a challenging few years” as the organisation unveiled its UK-wide figures.

There, the SBI was a little less positive than north of the Border, but still reached its highest point for a year, standing at +12.9 in the second quarter. That was up considerably from the +6 seen in the previous three-month period and compared to +15 a year ago, while 35 per cent of firms expected their performance to improve over the coming three months.

Cherry however cautioned that without significant progress on Brexit talks soon, “we run the risk of this confidence being lost”.