Economic Confidence Cooling – But Small Firms ‘Optimistic’

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

The overall index reading, at plus-20.3, is a significant decrease from plus-37.9 in the second quarter of 2015 and plus-41 a year ago.

But after an initial boost given by the clear General Election outcome, the results are seen as reflecting the impact of recent changes announced in the July 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.

And the number of businesses expecting to grow over the next 12 months has also fallen – down to 58.7 per cent from 65.3 per cent in the previous three-month period.

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.

Wilfred Mitchell, policy chairman of the FSB in Northern Ireland, said: “These 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.”

He added: “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.”

Mr Mitchell insisted FSB members locally remain “steadfast” in their intentions to grow, create jobs and export.

“But 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.”