Andrew McRae

The Federation of Small Businesses (FSB) said its Small Business Index (SBI) found confidence fell to -67.2 in Q4 2024, its lowest level since Q4 2020, when it stood at -69.

The latest results represent the third consecutive quarterly slide in small business optimism in Scotland, dropping from -41.2 in Q3 last year. 

The growing negative sentiment reflects uncertainty surrounding the broader economy, and falling confidence UK-wide, with the UK SBI figure standing only slightly higher at -64.5 in Q4. 

Andrew McRae, FSB Scotland policy chair, said: “These worrying results underline that we need urgent, concrete government action on the issues that keep small business owners awake at night.

“So many of the pressing issues come down to cost and cashflow. That is why, for example, the government’s plans to tackle late payments, the scourge of many small businesses in Scotland, cannot come soon enough.

“It must also be acknowledged that the upcoming Employment Rights Bill is a serious concern for small firms, with nine out of 10 owners saying they are worried about its introduction.

“We are keen to gain a fuller picture of precisely what factors are shaping this gloomy outlook and this is one of the key focuses of our largest research project to date, The Big Small Business Survey. To that end, we would encourage as many small businesses in Scotland as possible to take part.”

Six out of 10 respondents in Scotland (59%) cited the performance of the domestic economy as the biggest barrier to the growth of their own business. Three quarters (74%) experienced rising costs in Q4, largely due to increases in utility bills, as well as labour and tax costs. 

The net balance of small businesses reporting revenue growth in Scotland fell to -36.7, compared to -13.1 in the previous quarter. Fewer than one in five (17.9%) saw revenues grow, the lowest proportion since Q1, 2021.   

Looking further ahead, there was a positive net balance of Scottish firms looking to expand in the next 12 months, at 5.4%. However, this represents a large drop from the previous quarter (30.4%) and is significantly below the UK average for Q4 of 19.2%.