Morale of Scots small firms sinks over Brexit and GDP fears

Morale among smaller firms has sunk to a near record low with a 'long-term optimism gap' widening between businesses in Scotland and the rest of the UK.

Scottish small businesses are concerned over Brexit and the flatlining GDP

The poor performance of the Scottish domestic economy is seen as a “barrier to growth” by a majority of firms, as they also voiced concerns over the Scottish Government’s income tax hikes unveiled in the Budget, according to new figures from the Federation of Small Businesses (FSB).

Opponents have now urged the SNP to give businesses a “helping hand” with a greater focus on boosting growth.

The latest Scottish Small Business Confidence index saw a fall to -21.4 points in the final quarter of last year. This is down from -15.3 points over the previous three months and has only once been lower in the five years of the index.

The UK equivalent figures fell from +3.6 points to -2.5 points.

FSB Scottish policy convenor Andy Willox said: “The final months of last year saw Scottish and UK small business confidence slip to near record lows. Last year’s bruising ­trading conditions are most likely to blame, compounded with concerns regarding Brexit and worries about local economies.”

Scottish growth has trailed the rest of the rest of the UK in the aftermath of the global oil price crash of 2014, which decimated the North Sea and had a knock-on effect for the rest of the economy. The most recent figures saw growth of just 0.1 per cent, a third of the rate for the UK as a whole.

The condition of the domestic economy was highlighted as a barrier to growth by more than half (52 per cent) of the Scottish businesses surveyed by FSB. A balance of 17.5 per cent of Scottish smaller businesses reported a fall in gross profits in the final quarter. On the upside, the net share of firms planning to increase investment rose for the second consecutive quarter.

Mr Willox added: “Though business confidence has dropped across the board, these figures show a long-term optimism gap between a typical firm in Scotland and their counterparts elsewhere in the UK. If Scotland is to confound predictions of sluggish economic growth for the foreseeable future, then closing this gap should be a top priority.

“The new Scottish Government investment rates relief should help more businesses realise their investment intentions, but only a minority in enterprise wanted any change to Scottish income tax rates. While these figures were gathered ahead of December’s Scottish Budget, it seems unlikely that the planned income tax rises will reverse this trend.”

Finance Secretary Derek Mackay unveiled an overhaul of the Scottish tax system which will see workers on a salary up to £26,000 paying slightly less in tax. Those above this face tax rises.

Conservative finance spokesman Murdo Fraser said: “It’s little wonder that small firms are losing confidence when the SNP is hammering taxpayers across Scotland.

“As we prepare for Brexit, it’s vital that the Scottish Government gives the Scottish economy a helping hand. That means setting competitive tax rates so Scotland gets a reputation as a great place to work and set up a business.”