Scotland’s small businesses are having a confidence crisis, as the Federation of Small Businesses record the lowest confidence levels in the nation since the pandemic.

The latest Small Business Index found that confidence fell t0 -67.2 in the last quarter of 2024, the lowest level since the fourth quarter of 2020, when it was just -69.

This is the third consecutive quarterly slide for small business confidence in Scotland, which started at -41.2 in the third quarter of 2024.

Uncertainty about the economy as a whole is driving this negativity, with the UK figure reflecting the same lack of business confidence at -64.5.

“These worrying results underline that we need urgent, concrete government action on the issues that keep small business owners awake at night,” Andrew McRae, FSB Scotland‘s policy chair, said.

“So many of the pressing issues come down to cost and cashflow, that is why – for example – the government’s plans to tackle late payments, the scourge of many small businesses in Scotland, cannot come soon enough.

“It must also be acknowledged that the upcoming Employment Rights Bill is a serious concern for small firms, with nine out of 10 owners saying they are worried about its introduction.”

About three quarters of Scottish respondents (74%) cited rising costs, largely in utility bills, as well as labour and tax costs as their biggest barrier to growth, while about six in ten (59%) cited their performance in the domestic economy was holding back their growth.

The net balance of Scottish small businesses reporting a growth in revenue fell to -36.7 from -13.1 in the previous quarter. Less than one in five (17.9%) reported revenue growth, the lowest amount since 2021’s first quarter.

However, there is a positive net balance of Scottish firms looking to grow in the next year, at 5.4%. This does, however, represent a major drop from the previous quarter (30.4%) and is much less than the UK average of 19.2% this quarter.

Taxing fears have gripped the nation, as businesses reel from the UK government’s decision to raise the national insurance contributions of employers by 15% from April. This will cost £850 per employee on average, the Scottish Government estimated.

Ahead of a debate in Scottish parliament, Employment and Investment minister Tom Arthur said that the move would likely drive higher prices, which would be placed on consumers, and called the new policy a “tax on jobs.”

“This decision is hitting Scottish businesses hard, reducing their ability to contribute to Scotland’s economy, all while hurting employees’ pay packets,“ he said.

“Businesses now face the impossible choice of cutting jobs, reducing hours, cutting wages, absorbing the costs themselves or passing some of the burden to consumers in the form of higher prices.

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“The First Minister set out a clear plan for growth in his Programme for Government, using the levers at our disposal to support businesses and to attract investment in critical areas like the offshore wind supply chain.

“Yet, our efforts to support businesses, entrepreneurs and investment are being undermined by this tax on jobs.

“If the UK Government is serious about economic growth, they must reconsider this decision before they cause lasting damage to Scotland’s economy.”

A UK government spokesperson explained: “We delivered a once-in-a-parliament Budget in October to wipe the slate clean.

“That provided the stability needed across the UK, to kickstart economic growth through our Plan for Change.

“It also included more money than ever before for Scottish public services, with the Scottish Government receiving 20% more funding per person than equivalent UK government spending.”