Slump in confidence among smaller Scots firms on back of soaring overheads

“Punishing” rises in overheads are a major driver of a slump in Scottish business confidence, according to new research from the Federation of Small Businesses (FSB).

Around three quarters of Scottish firms say the cost of running their business has increased since this time last year, according to the new statistics, compared to only one in 20 that have seen a decrease.

FSB’s Scottish small business confidence index fell steeply to +1.2 points in the third quarter of 2021, from +20.5 points in the second quarter, with the typical Scottish business now less optimistic than the UK average, a reversal of the situation seen over the summer.

David Equi, MD of Equi’s Ice Cream, says 'spiralling' energy prices make realising the firm's ambitions much more difficult. Picture: John Devlin.

The small business campaign group is warning that rising overheads are making it difficult for businesses to invest in measures to grow their operations or tackle their environmental impact, all impeding a recovery from the Covid crisis in a sustainable way.

Andrew McRae, FSB’s Scotland policy chair, said: “Scottish business optimism bounced back over the summer but has slumped in the autumn. That’s partly because the easing of Covid restrictions delivered a big confidence boost that’s waned over time.

“However, punishing rises in business overheads are also taking their toll on the trading outlook. And with a rise in payroll taxes on the way, there’s no end in sight.

“Spiralling overheads are one of the biggest headaches for our members. Smaller businesses neither have the statutory protections of consumers, nor the bargaining power of the biggest firms. That’s why FSB has been campaigning for the UK Government to take action to help these operators, at the very least easing the VAT burden on their gas and electricity bills.”

David Equi, managing director of Equi’s Ice Cream, said the firm has “bold” plans to invest in its operations and improve efficiency. “But I was shocked when I went to market and no energy supplier would quote me less than five times my current bill.

“These spiralling energy prices make realising these ambitions so much harder. After surviving the Covid crisis, I’m frustrated that government isn’t prepared to step up to protect local and independent firms.”

The FSB earlier this week called on policymakers to take certain steps to help small businesses reduce their environmental impact.

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