Small business confidence hits 12-month low in Scotland

The percentage of Scottish small businesses predicting growth for the next three months has fallen sharply on Q3 (down from 35% to 23%) and to its lowest level for the year – according to new quarterly research from Novuna Business Finance.

The decline in Scotland stands in stark contrast to a boom in small business confidence in London (46%) and the north West (30%), with Scotland trailing the UK national average of 32%.

Percentage of small businesses in Scotland predicting growth during 2023

The biggest challenges for the final months of the year, as cited by Scottish small businesses comprised of:

• Being hit by rising costs/charges from my suppliers (40%).
• Rising energy costs - in terms of the cost of running the business (39%).
• Customers spending less money with them (37%).
• Not being able to pass on inflationary prices increases to their customers /clients (30%).

Nationally, the Novuna Business Finance study also reveals contrasting growth predictions by industry sector. In the manufacturing sector, the percentage of small businesses that predict growth has fallen to its lowest level for three years (23% in Q4 2020). Construction was another sector where the percentage of small businesses predicting growth (21%) has fallen to its lowest level since Q3 2022 (18%).

Percentage of small businesses predicting growth in the manufacturing sector

Percentage of small businesses predicting growth in the construction sector

Growth forecasts in the media and marketing sector have also hit their lowest level since Q3 2020. The percentage of small businesses predicting growth for Q4 2023 has fallen to 28% - with growth forecasts falling in consecutive quarters throughout 2023.

Percentage of small businesses predicting growth in the media and marketing sector

2023 ends well for IT, transport and retail sectors

Set against the challenges in the manufacturing, construction and media sectors, small businesses in three sectors are set to finish 2023 on a high. Following the adverse impact of lockdown and the cost-of-living crisis on the high street, small business owners in the retail sector are bullish about growth outlook going into the Christmas countdown period. Nationally, 33% of retail small businesses predict growth for the next three months – with growth predictions at the highest level since January 2021 (41%).

For small businesses in the transport and distribution sector, the percentage of business owners predicting growth has hit a 12-month high (38%), with quarter-on-quarter rises in growth forecasts recorded through the course of the year.

Percentage of small businesses predicting growth in the retail sector

In IT and telecoms, growth forecasts soared to 50% (up from 35% last quarter) – reaching the highest level in the sector since January 2018.

Small businesses in agriculture and hospitality hold firm

After a gruelling few years - when seasonal businesses in agriculture and hospitality have had to cope with the successive impacts of Brexit, Covid and the cost-of-living crisis - 2023 has been a year of much-needed stability for small business owners. In the hospitality sector, 35% of small business owners predict growth - the third consecutive quarter when growth forecasts have stayed in the mid-thirties.

In the agricultural sector, the percentage of small business owners predicting growth fell slightly on last quarter (from 31% to 26%), but 2023 as a whole has been a year of strong and more consistent outlook than the previous two years. Significantly, given the seasonality of agricultural small businesses (and with growth outlook typically dipping during Q4), the growth picture for 2023 shows significant improvement on the final months of previous years.

Percentage of small businesses predicting growth in the agricultural sector

Notes

The research was conducted by YouGov among a representative sample of 1,107 small business decision makers between 2-16 October 2023, spanning all key industry sectors.