Small business confidence takes knock as caution prevails
17 December 2007
Confidence levels amongst Britain's entrepreneurs have taken a knock during the course of 2007, according to the latest results from Small Business Confidence Index by Bank of Scotland Business Banking.
The index, which measures small business optimism across five key economic areas, reveals a sharp fall in small business confidence levels of six points since April earlier this year. The Index (which runs from 0 to 100 - where 0 is completely pessimistic and 100 is completely optimistic) shows that confidence amongst small businesses has fallen from 48 in Q2 to 42 in Q4.
A decline in the overall confidence indicator is reflected in key findings from the research which reveal that only a third (33%) of small business owners believe that now is a good time to be running a small business in Britain, compared to nearly four in ten (38%) who think the opposite. More than six in ten (63%) small business owners now expect general economic conditions to worsen over the next twelve months – an increase of 24 percentage points on the number expressing a pessimistic outlook in Q3. Given the uncertainty surrounding current market conditions, nearly half (45%) of entrepreneurs are nervous about the prospects for small business in Britain. Only a quarter (25%) remain confident.
With optimism varying more by location than sector, small businesses in Scotland will end the year as the most optimistic about their future and the general economic climate with an Index score of 46 (down five points from April), whilst businesses in Yorkshire and the West Midlands end the year as the most pessimistic with a score of 39.
Economic conditions: By a margin of nine to one, small businesses think that the general economic conditions over the next 12 months will worsen (63%) rather than improve (7%). A quarter (26%) think conditions will remain the same.
Growth expectations: Despite the prevalence of pessimism towards economic conditions, a quarter of small businesses (23%) are still expecting to achieve double digit growth in 2007.
Demand for services: Nearly four in ten (38%) expect demand for services and/or products to increase over the next 12 months – a fall of 11% from the third quarter.
Recruitment intentions: One in five (22%) small business owners plans to employ more staff over the next twelve months - a fall of 8% from April.
Running a business: Exactly half (50%) think that it will become more difficult to run their business over the coming year as compared to the previous twelve months. Only one in eight (12%) expect it to become easier.
Ivan Matviak, Head of Bank of Scotland Business Banking said: "The economic uncertainty that has dominated the news agenda throughout the latter half of 2007 has clearly filtered down to Britain's small business community. Whilst there are still some healthy growth expectations amongst a significant proportion of these owner managers, the vast majority are undoubtedly taking a more cautious approach when assessing both their own business prospects and the outlook for economic conditions over the coming year. These findings suggest that we can expect recruitment to be measured and growth to be steady but slowing. However, faced with a growing tax burden and an impenetrable maze of red tape, businesses will have to continue operating in a regulatory and fiscal environment that offers very little support or encouragement."
