Retailers are the most pessimistic small businesses in the UK, according to new findings, with half expecting their performance to worsen up to Christmas.
The latest Federation of Small Businesses (FSB) Index revealed that retailers have the lowest confidence level of any sector, with 43% forecasting their fortunes will dive. They blamed surging wage, fuel and property bills for their gloomy mood. Only one in six believe their performance will improve.
Overall the FSB said its confidence index had fallen into negative territory for only the third time since the Brexit vote with optimism amongst sole traders dropping to an all-time low.
It found that, amongst ongoing Brexit uncertainty, only 29% of small firms expect their performance will improve over the next quarter.
Close to three-quarters of small businesses reported that operating costs rose particularly labour, utilities, rent and fuel. With employment levels at record highs, 65% said they had increased wages over the last 12 months. The proportion awarding pay increases of 4% or more – 28% – hit an all-time high.
Almost a third of small exporters reported falling sales in the third quarter, up from 19% in the same period last year. One in five expect this trend to continue in the fourth quarter compared to 15% last time.
Optimism amongst sole traders also dropped to an all-time low with the FSB suggesting that their confidence had been hit by the recent Government announcement that it is reneging on its promise to abolish Class II National Insurance Contributions. This is forecast to cost sole traders an estimated £1bn in the three years to 2021.
“We haven’t seen a string of negative confidence readings like this since the years immediately after 2009. Small firms need some Brexit clarity before Christmas,” said FSB national chairman, Mike Cherry.
“If we reach the Budget and things are still up in the air, we’ll be looking for additional financial support for smaller businesses as they prepare for life after March 2019.
“It’s worrying to see small exporters already reporting a drop in overseas sales over the last quarter. Confidence among the 4.8 million-strong self-employed community has plummeted. This government needs to do some soul searching – a broken promise on Class II NICs, failure to take full responsibility for delivering a pensions dashboard and threats to the New Enterprise Allowance all have the self-employed once again questioning whether this administration is on their side. “
Sign up to our newsletter to get the latest from Business Advice.