Scottish small business confidence at highest level in two years, index shows

Small businesses in Scotland are more upbeat than they have been for two years, a small business group says.

The Federation of Small Businesses (FSB) Small Business Index for Q1 2024 revealed that business optimism has risen to a positive score of 10.7 on the index, surpassing the UK average of 5.5.

The FSB says the optimism is likely due to increasing consumer expenditure and overall economic growth. Despite this, it warned of the persistent challenges faced by smaller firms, as many reported decreases in revenue and staffing levels.

Andrew McRae, FSB Scotland policy chairman, said: “It is very welcome that we are starting to see the first green shoots of economic recovery, with nearly two in five small businesses in Scotland planning to expand in the coming year.”

He added: “But after two hard years of the post-Covid cost-of-doing-business crisis, we can’t take sustained recovery for granted. Our members’ experience shows it remains a tough business environment with sharply increased costs across the board.

“It’s therefore vital the new First Minister puts growth and the needs of small businesses at the heart of his agenda. That means delivering on the most significant planks of the New Deal for Business, and in particular ensuring there is a fuller assessment of the impact on small businesses whenever any new regulations are brought forward.

“There’s also a pressing need to accelerate work to understand the cumulative impact of regulations on small businesses.”

The SBI discovered that over a third of small businesses (34.8%) in Scotland expect their performance to improve in the next quarter, while less than a quarter (24.1%) anticipate it will deteriorate.

These findings reveal the most positive outlook since the initial quarter of 2022 and comes after three back-to-back quarters of negative sentiment.

However, over four-fifths of Scottish firms (83.2%) endured escalating costs, mainly due to rising utility bills, rent payments, and wages. The percentage of businesses reporting a decline in revenue (33.9%) surpassed those experiencing an increase (31.3%), and slightly more companies witnessed a contraction in staff numbers (11.5%) compared to those recording an increase (10.6%).

The Scottish Government has been approached for comment.

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