Small business confidence plummets as one in seven bosses look to downsize

WEAK domestic growth and flagging consumer demand has led to small business confidence falling for the fourth quarter in succession, with many bosses expecting the situation to worsen, figures show.
Mike CherryMike Cherry
Mike Cherry

The Federation of Small Businesses (FSB) latest Small Business Index (SBI) stands at -2.5 in the last quarter of from a year from a high point of +20 at the start of the year.

Almost a third of firms expect their performance to worsen over the next three months while a quarter expect an improvement. This is only the second negative reading recorded in the last five years. The first was registered in the wake of the EU referendum.

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A record one in seven small business owners are planning to downsize, close or sell their business over the coming three months and three quarters of firms report a rise in operating costs compared to this time last year.

The figure is at a five-year high, with the increase frequently attributed to labour, utility and input costs.

Meanwhile profitability has fallen with the proportion of small businesses reporting a fall in profits is at its highest since 2013.

The domestic economy is mentioned most frequently by small firms as a barrier to achieving growth over the next 12 months.

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Mike Cherry, FSB National Chairman, said: “As we progress to stage II of Brexit talks, negotiations with the EU27 are set to continue dominating the political agenda.

“While the swift agreement of a transitional arrangement and an ambitious free trade agreement with the EU are absolutely critical, it’s spiralling costs, weak growth and flagging consumer demand at home that are front of mind for small firms day to day.

“It’s troubling to see a record number of entrepreneurs seeking an exit as these challenges prove too much for many.

Retailers and construction firms are disproportionately feeling the inflationary squeeze.”

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