Small business confidence plummets to levels not seen since the pandemic, FSB says

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Small business confidence plummets to levels not seen since the pandemic, as firms battle against surging costs, sky-high utility bills and late payments

  • Federation of Small Businesses warns that many firms are battling to stay open 
  • Small businesses in retail and hospitality hit particularly hard, FSB said 

Confidence among UK-based small business owners plunged to the lowest level seen since the second Covid-19 lockdown in the final quarter of last year, the Federation of Small Businesses has warned. 

The Small Business Index headline confidence figure in the final quarter of 2022 fell to -46 points, down from -36 points in the third quarter and marking the lowest reading since the final quarter of 2020, when it was -49 points.

Swathes of small businesses up and down the country are being weighed down by sky-high costs, surging utility bills and supply chain delays and delivery woes.

Struggling: Swathes of small businesses in the UK are battling against rising costs

Small businesses operating in retail or hospitality were among the hardest hit in the final quarter of last year, according to the FSB.  

The FSB said: ‘This is particularly troubling during the traditional “golden quarter” for consumer-facing businesses such as shops, bars, and restaurants.’

Worryingly, a growing number of small businesses reported a drop in revenues over the previous three months, and their outlook for the coming months remained similarly downbeat. 

Forty-four per cent expect to see a fall in revenues in the coming months, while only 29 per cent expect them to increase. 

Hiring levels are also struggling as small businesses battle to keep their costs down, the FSB added.

Dave Fishwick

The proportion of small businesses which saw employee numbers fall outweighed the number of those which gained staff over the previous three months.

But the employment outlook for the next three months was more upbeat, with one in seven small businesses expecting to boost their staff numbers.

Inflation continued to take a heavy toll on many small businesses, with nearly two in five claiming costs were significantly higher than in the same period a year ago.

Utility bills, including energy, were cited by more than three in five small firms as a driver of their change in costs.

Small firms hit by late payments  

Additionally, late payments are still holding back a significant number of small firms, with three in ten small businesses stating their payment situation had worsened over the previous three months.

The FSB said it wants to stamp out the problem of late payments to small businesses once and for all. 

It wants to make the audit committees of large corporates responsible and accountable for supply chain payment practices and see the introduction of a legal requirement that payment times and conditions be published in annual reports. 

Martin McTague, national chair of the FSB, said: ‘There’s no way to sugar-coat these figures – small businesses’ confidence is at its third-lowest level since we started tracking it nearly a decade ago. 

 Small businesses are always the engine room of any economic recovery. The more rapidly small firms pull through, the more rapidly we can all recover

 Martin McTague, national chair, FSB

‘But business owners are resilient and where there is a will, we will find a way through.

‘Clearly, falling consumer spending, inflation, and high energy bills are all taking a toll, and poor results after the golden quarter are particularly disappointing – but this should also be a time to grasp the nettle and be decisive in finding more ways for the economy to grow, which is why we have drawn up a plan of action for the Government to implement.

‘Small businesses are always the engine room of any economic recovery. The more rapidly small firms pull through, the more rapidly we can all recover.’

He added: ‘Helping more people into work, tackling late payment, driving energy efficiency, powering R&D and getting more people to start up on their own are all initiatives that will make a real difference to the economy – just as small business owners individually will continue to demonstrate the ingenuity they showed during the pandemic to find new markets and new ways of working.

‘Small firms are a fantastic national resource of innovation and creativity – especially if given the right conditions to flourish. These results are incredibly worrying, yes, but they are not the final word.’

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