Economic Confidence Cooling But Small Firms Remain Optimistic Says FSB Research

WHILE small business confidence is cooling, levels still remain in positive territory, according to the latest Federation of Small Businesses (FSB) Small Business Index (SBI).

The overall SBI reading at +20.3 is a significant decrease from +37.9 in the second quarter of 2015 and +41 a year ago.

After an initial boost given by the clear General Election outcome, these results reflect the impact of recent changes announced at the Summer Budget and, within Northern Ireland, a continuing sense of economic and political instability.

Lower levels of confidence are reflected in more firms reporting a fall in investment intentions this quarter, which have fallen from 26 per cent 12 months ago to 22 per cent this quarter.

The number of businesses expecting to grow has also fallen. Nearly six in 10 small businesses (58.7%) plan to grow in the next 12 months, down from 65.3% in the previous quarter.

Small businesses are continuing to work hard, despite the increasingly difficult business environment they are encountering.

This is demonstrated by some positive news in the data on small business productivity, which continues to rise sharply, reaching three per cent this quarter, compared with 0.6 per cent 12 months ago.

Dr Wilfred Mitchell

Wilfred Mitchell

Wilfred Mitchell OBE, FSB NI Policy Chairman said: “These latest results show that small businesses appear more cautious about their prospects than in recent quarters.

“To encourage growth, business owners require confidence and whether they are local businesses or foreign direct investors, confidence plays a large part in making investment decisions.

“The unpredictability of the political situation over recent months causes businesses to be cautious and reluctant to invest, which has an immediate and negative impact on job creation and economic recovery and growth.

“Skills shortages remain a major issue for small firms with 37 per cent of firms in Northern Ireland reporting this as a barrier to growth, which is also driving up wage costs alongside auto enrolment pensions and concern around the living wage being increased hot on its heels.

“Despite confidence levels decreasing, our members remain steadfast in their intentions to grow, to create jobs and to export.

“However it is essential that our elected representatives prioritise the need to reassure small firms and create the right environment for them to flourish. This is something we will be making clear when we launch our FSB NI Assembly Manifesto in November.”