Due to the dwindling number of companies ready and able to invest, confidence Scotland’s small business sector is faltering. Few firms anticipate an improvement in business conditions over the next quarter, according to research by the Federation of Small Businesses (FSB). The FSB’s findings also provided evidence that a greater number of companies expected business conditions to worsen.
The FSB’s findings also indicated that there were a smaller number of firms with plans to invest than average. The data coincided with this quarter’s Business Monitor survey, which was published by Lloyd’s TSB Scotland. There is a large discrepancy between those that report a rise in revenues and those that report falling revenue.
Of the 270 firms surveyed by the FSB, 16% expected a significant reduction of investments. This figure is up 6% compared to the 10% of firms that held this opinion during the first quarter of the year. Just under one third of firms forecast more declines in the next quarter.
In contrast, 8% of small businesses in the UK expect to increase capital spending. Scotland’s investment prospects are not the worst in the UK, however. Wales and Northern Ireland’s outlooks were even worse.
Economic recovery is typically driven in part by business investments. The low investment figures, along with uncertainty and low levels of confidence make the chances of recovery seem bleak. This bleak economic outlook is probably the cause of employee reductions in small businesses for the past three quarters.
The availability of credit is a bigger problem than affordability, according to the survey. About three fourths of firms that were surveyed reported that credit availability was poor, while only 61% of the surveyed firms reported that credit was unaffordable. Credit is slightly more available than it was earlier in the year, but the figures are still disappointing.