Just 36% of small and medium-sized enterprises (SMEs) in the UK expect to grow in the first quarter of 2016, according to Bibby Financial Services.
The company's latest 'SME Confidence Tracker' hows that growth expectations plummeted by ten percentage points from Q3 to Q4 in 2015, while almost one in five (17%) small businesses surveyed expect sales to decline in the first three months of the year.
Of all parts of the UK, Scotland appears worst hit with only 29% of Scottish business owners and decision-makers expecting sales to increase, compared to the national average of 36%.
David Postings, global chief executive of Bibby Financial Services, said: "Recent ONS (Office for National Statistics) data shows growth in the UK economy slowed in 2015, with third quarter growth cut from 0.5% to 0.4%. Our latest SME Confidence Tracker reflects this dampened outlook amongst the country's small businesses."
The Q4 survey indicates that SMEs will enter 2016 with muted investment plans, with over a third (35%) saying that they do not intend to invest over the next three months. Top of the list of reasons for holding off on future investment is the uncertain economic environment in the UK. Almost a third (29%) of small business owners and decision-makers cite this as a barrier to capex, up from 21% in the third quarter.
Mr Posting added: “SME confidence is plummeting, while investment is only being made if it is essential. Concerns over the uncertain UK economic environment are strengthening, suggesting that SMEs believe the recovery is losing steam.
Where businesses are planning to invest over the next quarter, their reasons for investment are focused on maintaining "business as usual" activities, such as replacing outdated equipment and keeping ahead of competitors. Despite investment in existing and new staff topping the list of planned investments, only one in ten SMEs say that "ensuring the business attracts and retains the best talent" is a primary reason to invest.
