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Sep 21, 2016

Small Firms' Confidence Sinks to Lowest Level For 4 Years over Brexit Vote | The Guardian - September 21, 2016

Phillip Inman
Confidence among small businesses plummeted after Britain’s vote to exit the European Union to its lowest level for four years following concerns that the economy would slip into recession.

But the loss of faith among SMEs could be shortlived after a modest recovery at home and abroad that is expected to result in most firms expanding over the next year.
The Federation of Small Businesses said its survey for the three months to the end of August provided a mixed picture after the trepidation felt by firms at the outcome of impending Brexit negotiations was offset by the signs of a strong domestic demand and an increase in exports.
Small business confidence fell into negative territory in the third quarter for the first time since 2012 after the number of business owners confident about the year ahead was outnumbered by those that were negative.
The lobby group’s small business index dropped for the third quarter in a row to -2.9, giving the second largest year-on-year fall in confidence in the index’s history.
But the report echoed similar business surveys that show that companies have started to set aside the dire warnings of the Treasury and International Monetary Fund of a likely downturn and are bouncing back from the Brexit vote.
The FSB found many small firms reported greater access to finance, a rise in new employment and reduced spare capacity.
More than half of firms said they expected to grow over the next six months and only 11% expected to shrink.
Mike Cherry, the FSB chairman, said the low pound and the resilience of consumer demand had prevented a slump, though they only masked deeper issues limiting growth that would reassert themselves over the next six months.
He said: “There is no doubt that the political shock of the Brexit result has taken place at a time of weakening business confidence. For the first time in four years, confidence is in negative territory. This persistent downward trend in UK business confidence reflects underlying issues that predate the Brexit decision.”
The report said firms may have “priced in” the impact of the EU referendum result and were now looking for growth opportunities.
“Small firms are resilient and will survive the current fragile economic outlook, but to avoid an economic slowdown this data should be a wake-up call for our elected politicians,” he added.
Cherry urged Philip Hammond to use his autumn statement in November “to back infrastructure projects at local and national level, to simplify the tax system and to help reduce the costs of doing business”.