A series of stressors, including increased overheads, skills shortages and future economic concerns, have hit Scottish business confidence over the last three months.

According to data collected by the Federation of Small Businesses (FSB), nine in ten Scottish firms (91%) reported an increase in costs in the second quarter of this year.

The FSB Small Business Confidence index measures businesses’ views on whether trading conditions will improve or deteriorate over the coming months. This quarter’s Scottish figure is the lowest since the last three months of 2020.

The FSB’s index for Scotland stands at -31.8 points for 2022’s second quarter, which is a drop from the +14.3 points recorded at the start of the year.

Data has revealed that the average Scottish business owner is now more pessimistic than the UK average. However, the UK index has also dropped, falling to -24.7 points and down more than 40 points on the same quarter of 2021.

According to the data, around two in five (39%) leaders see the lack of access to skilled staff as one of the biggest barriers to growth, behind concerns about the domestic economy which were cited by three in five operators (59%).

The research also found that around three in five (61%) Scottish businesses have been running below capacity over the mentioned period.

Asked to identify the source of increasing costs, 73% of Scottish businesses pointed to fuel while 67% highlighted utilities.

Commenting on the research, Andrew McRae, the FSB’s policy chair for Scotland, said: “Across Scotland, many independent and local businesses are finding trading conditions merciless.

“Overheads are rising, and every penny spent at the pump or on energy bills is cash that can’t be used elsewhere. Businesses in sectors such as retail, tourism, and hospitality – especially in rural areas – are finding it difficult to recruit and retain staff.”

He added: “These factors mean that far too many businesses say they’re operating at far from their maximum capacity, which in turn slows down their ability to recover from the hits they took over the course of the pandemic.

“Whoever is next to get the keys to 10 Downing Street should prioritise measures to help local and independent firms face these challenges and play their part in economic recovery.”

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Recent research conducted by the Office for National Statistics and the Scottish Government found that, despite a month-on-month increase to overheads for Scottish businesses, only around a quarter are passing this increase onto their customers.

The same research found that difficulties in recruiting employees had been experienced by almost half (45%) of Scottish firms.

Data from the latest Accenture / S&P Global UK Business Outlook found that Scottish business confidence fell to a record low in June but remains stronger than the rest of Europe.

While the findings come amid global economic uncertainty, a net balance of +17% more private sector firms forecast their activity to increase over the coming year. This is half the level recorded in February (+34%) and is now weaker than most other regions in the UK.

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