Confidence among small businesses has dropped significantly this quarter, and the self-employed are feeling particularly pessimistic about their prospects for the coming months, according to the latest Federation of Small Businesses (FSB) Small Business Index (SBI).
Amid ongoing Brexit uncertainty, fewer than one in three (29%) small firms expect their performance will improve over the next quarter. The UK SBI confidence measure stands at -1.7 in Q3 2018, down from +12.9 in Q2 2018.
This marks the third negative SBI reading since the wake of the EU referendum in Q3 2016. The SBI has not returned to the level seen in Q4 2015 (+21.7) at any point since.
Close to one in three (27%) small exporters report falling international sales in Q3 2018, up from 19% in the same period last year. One in five (21%) expect this trend to continue in Q4, compared to 15% in Q3 2017.
Research published by FSB on Tuesday reveals that only one in seven (14%) small firms have started planning for a no-deal Brexit.
The latest SBI also shows confidence among the self-employed (-18.4) falling to an all-time low. The Government recently announced that it is reneging on its promise to abolish Class II National Insurance Contributions (NICs) – a move forecast to cost sole traders an estimated £1 billion in the three years to 2021.
FSB National Chairman Mike Cherry said: “We haven’t seen a string of negative confidence readings like this since the years immediately after 2009.
“Small firms need some Brexit clarity before Christmas. Ultimately, we want to see a deal that works for all businesses – with easy cross-border trade, access to skills and funding streams all protected. The number one priority is ensuring the transition period that we’ve fought for is nailed down by the end of this year.
“If we reach the Budget and things are still up in the air, we’ll be looking for additional financial support for smaller businesses as they prepare for life after March 2019. It’s worrying to see small exporters already reporting a drop in overseas sales over the last quarter.
“Confidence among the 4.8 million-strong self-employed community has plummeted. This Government needs to do some soul searching – a broken promise on Class II NICs, failure to take full responsibility for delivering a pensions dashboard and threats to the New Enterprise Allowance all have the self-employed once again questioning whether this administration is on their side.
“The upcoming Budget is a decisive moment for this Government. Does it want to be remembered as an administration that backed sole traders, or one that was content to stifle their ambitions? That’s the question that Ministers should asking themselves in the weeks ahead.”