SMALL businesses in Scotland are more optimistic than at any time in the last two years, new figures from the Federation of Small Businesses (FSB) reveal, with confidence higher north of the Border than the UK average of +5.5.
FSB’s Small Business Index (SBI) for the first quarter of 2024 found confidence back in “positive territory” at +10.7% with the organisation saying that this “growing optimism reflects improvements in consumer spending and the economy more broadly”.
Scotland's 'latte levy' must be designed for the real world
However, Andrew McRae, FSB’s Scotland policy chair, warned of “clear signs of the strong headwinds continuing to face small businesses” as more firms reported falling revenues and staff numbers than experienced growth. He also cautioned that firms should not take recovery “for granted”.
Mr McRae said: “It is very welcome that we are starting to see the first green shoots of economic recovery, with nearly two in five small businesses in Scotland planning to expand in the coming year.
“But after two hard years of the post-Covid cost of doing business crisis, we can’t take sustained recovery for granted. Our members’ experience shows it remains a tough business environment with sharply increased costs across the board.”
Business confidence in reverse as hospitality crashes
Noting it is “vital” that new First Minister John Swinney puts growth and the needs of small businesses at the “heart of his agenda”, Mr McRae added: “That means delivering on the most significant planks of the New Deal for Business, and in particular ensuring there is a fuller assessment of the impact on small businesses whenever any new regulations are brought forward.
“There’s also a pressing need to accelerate work to understand the cumulative impact of regulations on small businesses.”
The SBI found slightly more than one-third of small businesses (34.8%) in Scotland expected their performance to improve in the next three months, compared to slightly less than one-quarter (24.1%) who expect it will get worse.
Praise for ‘tenacious and clever’ small businesses
“The findings represent the most positive outlook since Q1 2022 and follow three consecutive quarters of negative sentiment,” the FSB noted.
“Although Scotland’s GDP contracted by 0.6% in Q4 2023 on a quarterly basis, growth prospects appear more positive moving forward. While economic headwinds remain, it is hoped that small businesses in Scotland can expect demand from households to improve further this year once the Bank of England begins cutting interest rates.”
The index also revealed that more than four-fifths of firms in Scotland (83.2%) experienced rising costs, largely due to increased utility bills, rents and wage bills. And the proportion reporting revenue decline (33.9%) still exceeded the number reporting an increase (31.3%) in Q1, while slightly more firms experienced a contraction in employee numbers (11.5%) than an increase (10.6%).
The FSB said that looking ahead, a net balance of 9.1% of Scotland’s small businesses expect headcount numbers to rise in the next three months, while an increased proportion (39.1%) have aspirations to grow their business in the next 12 months. That, however, lags behind the 52.4% rate across the UK as a whole.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here