Rising overheads are a key factor behind a slump in Scottish business confidence, according to new research from the Federation of Small Businesses (FSB).
Around three quarters (77%) of Scottish businesses say the cost of running their business has increased since this time last year, according to the new statistics, compared to only one in twenty (5%) that have seen a decrease.
FSB’s Scottish Small Business Confidence Index fell steeply to +1.2 points in the third quarter of 2021, from +20.5 points in the second quarter. The equivalent UK-wide figure fell to +16.4 points from +18.4 points over the same period. This means the typical Scottish business is now less optimistic than the UK average, a reversal to the situation seen over the summer.
The small business campaign group is warning rising overheads are making it difficult for businesses to invest in measures to grow their operations or tackle their environmental impact. FSB says this will hold back efforts to recover from the Covid crisis in a sustainable way.
Andrew McRae, FSB’s Scotland policy chair, said: “Scottish business optimism bounced back over the summer but has slumped in the autumn. That’s partly because the easing of covid restrictions delivered a big confidence boost that’s waned over time.
“However, punishing rises in business overheads are also taking their toll on the trading outlook. And with a rise in payroll taxes on the way, there’s no end in sight.
“Spiralling overheads are one of the biggest headaches for our members. Smaller businesses neither have the statutory protections of consumers, nor the bargaining power of the biggest firms. That’s why FSB has been campaigning for the UK Government to take action to help these operators, at the very least easing the VAT burden on their gas and electricity bills.”
One business that’s been hit with the rising cost of energy is Equi’s Ice Cream. The business projects a 500% increase in the cost of energy for their flagship store in Hamilton, a change which they believe will cost them at least £50,000 a year.
David Equi, managing director of Equi’s Ice Cream, said: “We’re a growing business, despite being in operation for almost a century, with bold plans to invest in our operations and improve our efficiency. But I was shocked when I went to market and no energy supplier would quote me less than five times my current bill.
“These spiralling energy prices make realising these ambitions so much harder. After surviving the Covid crisis, I’m frustrated that government isn’t prepared to step up to protect local and independent firms.”
In a separate report launched this week, FSB is calling on policymakers to launch a new voucher initiative to help small businesses reduce their environmental impact. Dubbed ‘Help to Green’ the scheme would see businesses given grants of up to £5,000 to become more energy efficient.
Andrew McRae said: “In the short term, we need to help firms manage the overnight spike they’ve seen in their bills. Next, we need to support local and independent firms to reduce the amount of energy they use.“While smaller businesses know they have to take action, only a third of them have a plan in place to reduce emissions. Therefore governments in Edinburgh and London need to put together a package of help and support that helps firms move in the right direction.”