The Federation of Small Businesses (FSB) said its findings underlined the need for governments in both Edinburgh and London to provide greater second-wave coronavirus support to local firms, as well as the self-employed.
FSB’s UK-wide small business confidence index fell to -49.3 points at the end of 2020, the second lowest ever recorded by the research series.
However, the average Scottish firm is even less confident about prospects, according to FSB, with the equivalent Scottish figure plunging to -69 points, from -26.3 points in the autumn.
The bleak result comes after a record number of small business owners warned they were planning to shut up shop over the coming 12 months, putting the UK on course to lose more than 250,000 firms.
The latest FSB UK quarterly report showed that, as well as confidence at the second-lowest ebb in its ten-year history, one in five firms reduced headcount in the three months to December and one in seven expect to do so this quarter.
Andrew McRae, FSB Scotland policy chair, said: “The average Scottish business owner has grave fears about the future. These worries are founded upon firms facing weeks or months of restrictions after likely draining their cash reserves and taking on significant debt.
“That’s why governments in Edinburgh and London need to back our small businesses and those that work for themselves.
“We need to see the Chancellor expand help to company directors and boost the overall package of support to UK small businesses. This move must take place before the March budget.”
He added: “The Scottish Government too must turn warm words into hard cash for smaller firms. That means quickly providing easy-to-access cash grants for all Scottish smaller businesses hit by this crisis, no matter their sector or status.
“It remains far too difficult for many firms to access the financial help that might be the difference between their survival and failure.”
On the difference between the UK and Scottish confidence figures, McRae said: “While UK confidence is low, Scottish confidence is lower. This is likely due to our proportionally larger tourism and hospitality sector, as well as the restrictions Scottish firms faced when this survey was conducted.”
Close to 5 per cent of the 1,400-plus UK firms surveyed as part of FSB’s small business confidence index warned that they plan to close their doors in the next 12 months.
On top of the challenges caused by fresh lockdown measures, the report says exporters are having to assess what a new EU-UK trade agreement means for them, but without the cash they need to make adjustments to their operations.
McRae added: “A million people in Scotland are either employed by Scotland’s local and independent firms or work for themselves. But our neighbourhood entrepreneurs are in crisis.”
FSB surveyed some 1,400 small firms for the business index at the end of December, including 184 based in Scotland.