Surging operating costs, weak domestic growth and flagging consumer demand have led to increased pessimism among small and medium sized businesses (SMEs), according to the latest Small Business Index published by the Federation of Small Businesses (FSB).
The results from the final quarter of 2017 showed almost a third of firms expect their performance to deteriorate over the next three months, with the proportion of small businesses reporting a fall in profits reaching its highest level since 2013.
A record 14 per cent of small business owners are planning to downsize, close or sell their business over the coming three months, whilst almost three quarters have seen a rise in operating costs compared to this time last year, including labour, utility and input costs.
What’s more, in other research the London Chamber of Commerce and Industry’s Capital 500 survey of businesses has found that confidence has dropped among London businesses for the fourth consecutive quarter as Brexit overshadows trading. Adding to the FSB findings, the survey shows that most business leaders are short on confidence and expect economic conditions to worsen over the next 12 months, with expectations for profits and turnover at a record low.
Mike Cherry, FSB National Chairman, says that as the UK progresses to stage II of Brexit talks, whilst agreement of a transitional arrangement and an ambitious free trade agreement with the EU are “absolutely critical”, what is front of mind for small firms is the “spiralling costs, weak growth and flagging consumer demand at home”.
Mr Cherry adds: “The announcement of measures to help businesses faced with surging costs at the Autumn Budget, including a VAT threshold freeze, an early switch in the inflation measure used to increase business rates and an end to the staircase tax, could help spark a recovery in confidence over the coming year. An uptick in optimism is by no means guaranteed though. These commitments need to be delivered as swiftly as possible.”
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