BUSINESS confidence in Scotland has emerged from 18 months of decline to show a rise in the first quarter of this year, according to research from the Federation of Small Businesses (FSB).
Its latest business confidence index, while still in negative territory, showed an 8.5 point climb, from -28.9 at the end of 2016 to -9.6 in the first three months of 2017. The UK metric rose from +8.5 points to +20 in the same period.
The study also suggested that the Scottish economy is unlikely to rebound in the short term as firms who expect conditions to improve are still significantly outnumbered by those who expected them to worsen.
Andy Willox, FSB’s Scottish policy convener, said: “Scottish business confidence couldn’t fall much further at the end of 2016.
“A bounce at the start of this year is welcome, but looks like it will be tricky to sustain given that firms are reporting falling revenues.”
Data show that Scottish small business revenues declined at the fastest rate for four years, but most firms expect sales and turnover to grow over the course of this year.
The state of the domestic economy continued to be reported as the biggest barrier to growth by almost half (49 per cent) of respondents. Official figures published last week showed the Scottish economy contracted by 0.2 per cent during the fourth quarter of 2016 – a drop foreshadowed by last quarter’s confidence index.
“Too few Scottish businesses have faith that our economy is travelling in the right direction,” said Willox.
“The UK Government needs to convince firms that their plans for Brexit will safeguard their interests. The Scottish Government and our local councils also need to put local growth at the top of their agenda.”
Small business employment growth in Scotland was flat this quarter, according to the study. And, while this was set to rise over the next three months, hiring intentions were still much lower in Scotland than the UK average.
The rise in the National Living Wage, the resultant National Insurance and pensions auto-enrolment would leave the average smaller employer with an extra £2600 employment costs over the coming year, said the FSB. Respondents reported a marginal 0.3 per cent overall increase in their workforce, reversing the decline of the previous quarter by more than 10 percentage points, and 7.8 per cent predicted they will boost staff numbers over the next three months. A majority predict sales and turnover growth in 2017, with a 10 point rise from the previous quarter, but the study also found revenues had declined at the fastest rate for four years with 42.3 per cent reporting a fall, giving a net balance of -11 per cent. Four in 10 firms cited consumer demand as a brake on growth, while a quarter blamed skills shortages and an increasing number raised concerns about rising costs for inputs, fuel and utilities.
Willox added: “While economic silver bullets are in short supply, there’s plenty to be done to help firms drive local growth. For example, if we want to see smaller firms continue to create jobs, an expansion to the employment allowance must be delivered.
“In addition, Scotland’s smaller firms are now seeing overheads rising, while they continue to be owed billions of pounds in big business late payments. Efforts to address this problem seem to have stalled – we need to see them kick-started.
“Closer to home, a third of our local roads are in an unacceptable condition and Scotland lags behind England on every measure of digital connectivity. We need urgent action to fix our broken local infrastructure.”
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here