Confidence among small businesses has plummeted as the prospect of a no-deal Brexit becomes “real and imminent”, according to the Federation of Small Businesses (FSB).
The Small Business Index (SBI) found that small business confidence has fallen to -9.9, the lowest level since the wake of the financial crash in 2011, with over two-thirds (67%) of small businesses not expecting their performance to improve this quarter.
The report of 1,064 small businesses found that over a two-week period ending 3 December 2018, over half (58%) of retailers flagged the domestic economy as a growth constraint – up from 55% at this time last year.
Access to appropriately-skilled staff (36%), lack of consumer demand (29%) and labour costs (21%) were also frequently flagged as primary barriers to growth.
FSB national chairman, Mike Cherry, warned of the dangers of a “serious economic shock” posed by a no-deal Brexit.
“Two and half years on from the Brexit vote and small businesses are looking ahead to Brexit day with no idea of what environment they’ll be faced with in less than ten weeks’ time. The current uncertainty is making it impossible for firms to plan, hire and invest,” he said.
“That’s feeding into wider concern about the economy at large. We won’t see GDP growth pick-up again until there’s some certainty about how the business environment will change in the coming months.
“Come the beginning of April, small firms will not only have Brexit day to worry about but also Making Tax Digital, a higher living wage, rising auto-enrolment contributions and further business rates hikes. This will be a flashpoint for a lot of businesses, threatening the futures of many.”
The SBI also revealed that borrowing costs for small businesses have risen, with the proportion of successful credit applicants being offered a borrowing rate of 5% or more at a record-high 74%, while the proportion of small firms applying for external finance remaining low at 13%.
Cherry added: “With Brexit taking up all of the government’s bandwidth there are a huge number of domestic business issues that are not being addressed. They include the long-standing barriers small firms face when trying to access new finance, and the sky-high borrowing rates they’re often offered if an application is successful.
“This is another issue that will be exacerbated by a chaotic no-deal Brexit. When times are tough, big lenders often put supporting small businesses on hold.”