Compass

There is a growing gap between the confidence of small businesses in the North and in the South, according to the Federation of Small Businesses (FSB).

Overall, small business confidence rose 4.1 points to 21.7 compared with Q4 in 2015 on the FSB's index. But it found the gap in confidence between firms in Scotland, north east England and Wales, and those in the Midlands and south of England, is getting bigger.

While there is good news for the UK as a whole in terms of job creation, increasing revenues and improving productivity, firms in the North East of England, Scotland and Wales risk being left behind.

In the last 12 months, smaller firms in the North East, Yorkshire, Scotland and Wales have all shown a year-on-year decline in confidence. In Wales, confidence has dropped into negative territory for the first time in two years. In Scotland, confidence levels are at their lowest levels since the start of 2013. Elsewhere confidence levels have remained stable, supported in particular by firms in technology and business/professional services.

Nearly two thirds (59%) of businesses across the UK anticipate growth relatively unchanged from the last quarter, with almost one in four firms (24%) reporting a growth in revenue in the last three months, the highest since 2010.

Smaller businesses are still leading the way on job creation with firms reporting that they have expanded their staff in the last three months, with more planning to do so this spring.

Results also show smaller firms are making greater productivity gains and producing more for less. The SBI shows productivity has reached an all time high of three per cent which has doubled in the last 12 months.

John Allan, FSB National Chairman, said: “A clear divide in confidence is now emerging across different parts of the UK, with businesses in the South and in sectors like technology and professional services feeling more positive about 2016. The recent flooding is likely to further weigh on business confidence in the North where small firms are now beginning to pick up the pieces as the waters recede.

“FSB members across the country tell us they are concerned about a number of business challenges coming down the line in 2016. This includes the rollout of pensions auto-enrolment, the new National Living Wage, and changes to taxes on dividends. Members are also deeply worried about proposed mandatory quarterly tax reporting, which in its current form will add to the administrative burden of small firms and the self-employed."