Scottish business confidence drops amid no-deal concerns

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Small business confidence has dropped sharply and Scottish businesses are among the most concerned in the UK about a no-deal Brexit, new figures show.

The Federation of Small Businesses (FSB) Scottish Small Business Confidence Index fell 18.3 points – from +5.1 points to -13.2 points in the third quarter of 2018.

Across the UK the Index, which measures business owners’ assessment of business conditions, fell from +12.9 points to -1.7 points.

Meanwhile a separate FSB survey found more than half (56%) of Scottish businesses believe a no transition, no deal Brexit would impact negatively on their business, whereas only 5% believe it will have a positive impact.

Of the remainder, 27% of Scottish businesses believe such a move would have no impact, while 12% of enterprises said they did not know.

Across the UK, 48% of firms stated they believe a no deal Brexit would have a negative impact on their operations.

FSB Scotland Policy Chair Andrew McRae said: “The slide in business optimism over the last three months is perhaps unsurprising given the very public debate about the future of the UK outside of the EU.

“If you sell your products to the EU, buy goods from the EU or if your business relies on staff from the EU, you’re likely to see a no deal Brexit as a significant threat to your business.

“Businesses in Scotland are more likely to have concerns about this outcome.”

Only one in seven (14%) Scottish and UK small businesses have starting planning for a no-deal Brexit, according to the study which surveyed 1,234 small businesses in September 2018, with 178 from Scotland.

Almost a third (31%) of Scottish businesses surveyed say they plan to decrease investment ahead of March 2019.

Meanwhile the Index showed Scottish businesses reporting pressure on revenues and profits, alongside a spike in overheads – with the cost of fuel cited by many.

It stated: “While it is unclear exactly what role the Brexit negotiations is having on confidence levels, it would be surprising if the uncertainty around markets, supply chains and staffing was not feeding through to consumer and business sentiment.”

Mr McRae said it is understandable most Scottish small businesses have not yet started preparing for a UK outside the EU, given the “lack of clarity” around future trading arrangements.

He added: “What’s more worrying to see is the number of firms planning to postpone investment because of the associated uncertainty. We also see falling revenues and profits, compounded by rising utility and fuel costs.

“The last three months of 2018 provide an opportunity for key decision makers to put our smaller business on a steadier footing.

“We must prepare our smaller firms for any change in trading conditions. They must do what they can to tackle spiralling overheads. We can’t crash out of the EU into a high-cost, low margin trading environment.”

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