Business development · 15 January 2016

North-south divide in small business confidence revealed

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Small firms in the North report a steady decline in confidence

A growing gap in business confidence has emerged between small firms in the northern regions of the UK and those in the Midlands and the South of England.

According to the latest Federation of Small Business (FSB) “Small Business Index” from the fourth quarter of 2015, small business in Scotland, Wales and the northeast of England are at risk of being left behind, as firms report a steady decline in confidence year-on-year over the last 12 months.

Business confidence in southern regions has remained stable, supported in particular by firms in technology and professional services. Yet in Scotland, confidence levels are at the lowest level since the start of 2013. The morale of small business in Wales has dropped to negative levels for the first time in two years.

Small business owners are worried about the various challenges to be confronted in 2016, including mandatory quarterly tax reporting, the impact of the national Living Wage and tax dividend changes, all of which stand to add administrative pressure. Recent flooding is also likely to have had a negative impact on confidence, as small firms in the north start to pick up the pieces.

“Ministers need to be sensitive to the cumulative impact of challenges that small businesses now face, which may already be reducing investment intentions,” said national chairman of the FSB John Allan.

Overall, small business confidence across the UK is up. Small firms are leading the way in job creation, many having expanded staff in the last three months, with more expected to do so in spring 2016. Productivity is also on the up, with the study demonstrating that levels have doubled over the last 12 months and is now at an all time high of three per cent.

Almost two-thirds of firms expect growth to be relatively unchanged during the start of 2016, whilst 24 per cent reported revenue growth in the last three months – the highest numbers since 2010.

Allan continued to say: “It is clear that small firms are improving their use of capital equipment, providing better staff training and finding new ways to be more efficient.

“Although confidence is patchy across the UK, small businesses continue to show they are resilient, leading the way on employment growth and productivity,” he added.

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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