Confidence falls to four-year low among Scottish small businesses

Confidence among Scotland’s small businesses has fallen to its lowest level since the height of the Covid-19 pandemic, according to new figures from the Federation of Small Businesses (FSB).

The organisation’s Small Business Index (SBI) found confidence fell to minus 67.2 in the fourth quarter of 2024, its lowest level since the same period in 2020, when it stood at minus 69.

The latest results represent the third consecutive quarterly slide in small business optimism north of the border, dropping from minus 41.2 in the third quarter last year.

The decline is believed to reflect uncertainty surrounding the wider economy and falling confidence UK-wide, with the UK SBI figure standing only slightly higher at minus 64.5 in the fourth quarter.

Andrew McRae, FSB Scotland policy chair, said: “These worrying results underline that we need urgent, concrete government action on the issues that keep small business owners awake at night.

“So many of the pressing issues come down to cost and cashflow. That is why, for example, the government’s plans to tackle late payments, the scourge of many small businesses in Scotland, cannot come soon enough.

“It must also be acknowledged that the upcoming Employment Rights Bill is a serious concern for small firms, with nine out of 10 owners saying they are worried about its introduction.

“We are keen to gain a fuller picture of precisely what factors are shaping this gloomy outlook and this is one of the key focuses of our largest research project to date, the Big Small Business Survey.

“To that end, we would encourage as many small businesses in Scotland as possible to take part.”

Six out of 10 respondents in Scotland (59%) cited the performance of the domestic economy as the biggest barrier to the growth of their own business.

Three quarters (74%) experienced rising costs in the fourth quarter, largely due to increases in utility bills, as well as labour and tax costs.

The net balance of small businesses reporting revenue growth in Scotland fell to minus 36.7, compared with minus 13.1 in the previous quarter.

Fewer than one in five (17.9%) saw revenues grow, the lowest proportion since the first quarter of 2021.

The UK Government said it is backing British businesses through its Plan for Change, including tackling late payments and capping corporation tax at 25%.

A spokesperson added: “We’re also championing Brand Scotland to promote Scottish goods and services globally through our worldwide trade and diplomatic networks.

“In Scotland, business rates are devolved but in England the UK Government has delivered lower rates for leisure, hospitality and retail businesses.

“We will be publishing our plan to help small businesses start up and grow later this year.”

Business Minister Richard Lochhead said: “We recognise that many businesses are concerned about the impact of the UK Government’s decision to raise employers’ National Insurance contributions and that rising energy costs continue to bite hard.

“But we’re committed to helping make Scotland one of the best places to do business. That is why our Budget provides a package of non-domestic rates reliefs worth an estimated £731 million, including the Small Business Bonus Scheme which continues to be the most generous of its kind in the UK, taking over 100,000 properties out of rates altogether.

“Through our package of rates and reliefs over 95% of non-domestic properties continue to be liable for a lower rate than elsewhere in the UK.”