Small business confidence improves despite workforce cuts

Confidence among Scotland’s small businesses has improved despite almost a quarter of such firms cutting their workforce between April and June, a survey has found.

Research by the Federation of Small Businesses (FSB) shows the business confidence index for small firms in Scotland increased from a record low of minus 154.8 points in quarter one of 2020 to minus 10.1 points in the second quarter.

However, expectations of future performance were polarised, with a quarter (25%) of the 195 Scottish business owners surveyed in June expecting performance to be “much worse” over the coming quarter, while just over one in 10 (11%) forecast the opposite.

Meanwhile, the proportion of small firms that reduced staff numbers over the period April to June was at an all-time high of 23%.

At the same time, the proportion of businesses taking on new employees fell to a new low of 1.5%.

FSB Scotland policy chair Andrew McRae said: “After a complete collapse in business confidence in the previous quarter, the fact that confidence is coming back is most welcome.

“Given that so many small businesses were closed up until very recently, this increased optimism is due in no small part to the coronavirus support rolled out at speed by the UK and Scottish governments.

“But let’s be clear – small businesses are by no means out of the woods. These figures tell a tale of two economies – the one that is getting back to business and the one with a much tougher journey back.

Business minister Jamie Hepburn said the report was encouraging but that more work needs to be done to repair the economic damage caused by the pandemic.

He said: “The Scottish Government moved quickly to support businesses during the crisis with more than £2.3bn of support.

“We have put in place a £230m economic stimulus package, guidance and support to help businesses to safely restart, and our Advisory Group on Economic Recovery has made recommendations on how best we can restore the economy to sustainable growth.”