A record number of small business owners are planning to close their firms over this year, putting the UK on course to lose more than a quarter of a million businesses.
The quarterly Federation of Small Businesses (FSB) Small Business Index (SBI), carried out among 1,401 small businesses across the UK in December, found that just under 5% expect to close this year.
However, the figure does not reflect the threat of closure faced by those hoping to survive, despite having frozen their operations, reduced headcounts or taken on significant debt.
The proportion is at an all-time high for the SBI – which launched in the wake of the financial crash – and is more than double that recorded at the same point 12 months ago.
The UK SBI confidence measure stands at -49.3, down 27 points year-on-year. The reading is the second-lowest in SBI history, second only to that recorded at the beginning of the coronavirus crisis in March 2020.
The average Scottish firm is even less confident about prospects, with the equivalent Scottish figure plunging to -69 points from -26.3 points in the autumn.
The vast majority of those surveyed (80%) do not expect their performance to improve over the next three months.
Close to a quarter (23%) of small firms have decreased the number of people they employ over the last quarter, up from 13% at the beginning of last year, while 14% say they will be forced to cut numbers over the next three months.
About one in five (21.5%) Scottish small businesses fear that they may be required to reduce the number of people they employ over the next three months. By comparison, only 4.8% of Scottish small businesses intend to expand their workforce.
The proportion of small businesses forecasting a reduction in profitability for the coming quarter has risen from 38% to 58% – an all-time high.
Almost half (49%) of exporters expect international sales to drop this quarter, up from 33% at this time last year.
FSB national chairman Mike Cherry said: “The development of business support measures has not kept pace with intensifying restrictions – as a result, we risk losing hundreds of thousands of great, ultimately viable small businesses this year, at huge cost to local communities and individual livelihoods.
“At the outset of the first national lockdown, the UK Government was bold – the support mechanisms put in place weren’t perfect, but they were an exceptionally good starting point – that’s why it’s so disappointing that it’s met this second lockdown with a whimper.
“Company directors, the newly self-employed, those in supply chains, and those without commercial premises are still being left out in the cold,” he added
Andrew McRae, FSB Scotland policy chair, said: “The average Scottish business owner has grave fears about the future – these worries are founded upon firms facing weeks or months of restrictions after likely draining their cash reserves and taking on significant debt.
“We need to see the Chancellor expand help to company directors and boost the overall package of support to UK small businesses – this move must take place before the March budget.
“The Scottish Government too must turn warm words into hard cash for smaller firms, that means quickly providing easy-to-access cash grants for all Scottish smaller businesses hit by this crisis, no matter their sector or status.”