New figures from FSB show Scotland’s small business confidence has fallen sharply amid ongoing Brexit uncertainty. Businesses north of the border are amongst the most concerned in the UK about a no deal Brexit.

In the third-quarter of 2018, FSB’s Scottish Small Business Confidence Index fell from +5.1 points to -13.2 points. The Index is based on a survey of FSB members and was carried out in July 2018 – with 91 Scottish respondents and 978 across the United Kingdom.

A similar report published in August by Edinburgh-based business advisers and accountants, Scott-Moncrieff, also found that SME confidence in a post-Brexit future sunk further than statistics in 2017.

Nearly 80% of Small to Medium Enterprises surveyed showed concern over the economic outlook once the UK leaves the European Union.

Losing Confidence

A separate survey conducted by FSB shows that more than half of Scottish businesses believe a no transition, no deal Brexit would negatively impact their businesses – compared to 5% who believe it will have a positive impact.

Around 27% of Scottish businesses said they believe a no deal Brexit will have no impact upon their operations or output. UK-wide, nearly half (48%) of firms also agree that a no deal Brexit will negatively impact their operations, with London-based businesses having greater concerns than their Scottish counterparts.

FSB Scotland Policy Chair, Andrew McRae, said that the decline in confidence is unsurprising while the debate over the UK’s future continues.

“The slide in business optimism over the last three months is perhaps unsurprising given the very public debate about the future of the UK outside of the EU,” he said.

“If you sell your products to the EU, buy goods from the EU or if your business relies on staff from the EU, you will likely see a no deal Brexit as a significant threat.”

Preparing a No Deal Brexit

Although the UK’s exit date grows nearer, only one in seven Scottish businesses have begun planning for a no-deal scenario, the report said. Nearly one-third (31%) of Scottish firms say they plan to decrease investment ahead of March 2019 and the Index also highlighted the ongoing pressure on revenues and profits, alongside a spike in overheads.

Many Scottish businesses cited the cost of fuel as a primary concern and area in which money may be lost.

The Index states: “While it is unclear exactly what role the Brexit negotiations is having on confidence levels, it would be surprising in the uncertainty around markets, supply chains and staffing was not feeding through to consumer and business sentiment.”

McRae suggested that “given the lack of clarity” around future trading arrangements, it is understandable that most Scottish small businesses haven’t yet started their preparations for life outside the European Union.

He added: “What’s more worrying to see is the number of firms planning to postpone investment because of the associated uncertainty. We also feel falling revenues and profits, compounded by rising utility and fuel costs.”

McRae suggested that encouraging smaller firms to prepare for future challenges should be a key focus of government and industry and that companies must “do what they can to tackle spiralling overheads.”