Small business confidence has fallen back, according to the FSB

Small business confidence has fallen back, with business owners concerned about the prospects for the UK economy, according to the FSB’s Small Business Index.

The index showed a drop in confidence compared with the first quarter. The domestic economy is the biggest barrier to growth according to the survey, with 52 per cent of respondents saying it was holding them back.

Meanwhile operating costs are at their highest since 2013, with a net balance of 66 per cent reporting an increase in this measure.

Mixed picture

But the picture is imbalanced across geography and sectors, with some parts of the country demonstrating more positivity. The East Midlands registered the most positive outlook, followed by Wales and London.

However, Scottish businesses were broadly pessimistic, registering -4 per cent on the FSB’s survey.

Information and communication remained the most positive sector across the UK, followed by manufacturing. The wholesale and retail trade, however, was the most pessimistic, followed by arts, entertainment, and recreation.

Retail squeeze

Retailers particularly suffered thanks to the continued squeeze on household spending. Despite low unemployment, household budgets have been hit by a long-term wage squeeze and rising inflation.

So-called ‘wage restraint’ is also being seen amongst employees of small businesses, with wage growth down to just 1.9 per cent during the period. It is expected to slow further, to 1.6 per cent, over the course of the next year.

Commenting on the findings, FSB national chairman Mike Cherry said: “The headline confidence measure remains firmly in positive territory, but it has dipped since the steep rises we saw towards the end of 2016 and early 2017.

“The dip shows that momentum has slowed, and reflects a slight correction now that price rises driven by inflation have begun to be felt by small businesses and consumers.

“There are, however, substantial regional variations in confidence this quarter. This is evidence of the need for investment to be made which supports growth and productivity across the UK.”

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