Jo Morris

The current position stands in stark contrast to last summer, which saw a period of stability in Scottish growth outlook.

The research findings are the latest from Novuna Business Finance’s Business Barometer study, which has tracked the percentage of small business owners that predict growth every quarter for the last 11 years.

With Scottish small business confidence falling, Novuna’s new data also shows that current economic volatility is a cause of serious concern to 73% of small businesses. Whilst 10% already think US tariffs on the UK will directly impact their own businesses, a further 10% fear the supply chain disruption of tariffs on the EU. More significant, almost half of Scottish enterprises (47%) believe the current economic instability will play out in UK tax rises later this year - and 27% fear current geo-political events will trigger a fall in consumer spending this summer. All these factors are contributing to the significant fall in small business growth forecasts for the three months to 30 June.

Across the UK, the consequence of market uncertainty has led to falls in small business growth outlook across many key industry sectors, including manufacturing, construction, retail, media, education, legal, finance and medical services.

Growth outlook in the manufacturing sector has fallen to the lowest since the UK went into the first Covid lockdown and – if one rules this out as an exceptional period – this quarter is the first time in 11-years when the percentage of manufacturing small businesses predicting growth has fallen below 20%. In addition to this, growth outlook in retail has hit a three-year low and in construction a 12-month low.

Jo Morris, head of insight at Novuna Business Finance, said: “Events of recent weeks have delivered seismic shockwaves and - the one thing small businesses really dislike – uncertainty.

“After the promise of recovery last summer, there has since been a slide in Scottish small business confidence and this plays out with this quarter seeing small business growth forecasts at their lowest level for a year.

“Manufacturing is a particular concern, and even in those regions and sectors where growth forecasts are remarkably resilient, there remain serious fears about the possibility of tax rises later this year.

“The government is committed to a growth agenda for the UK economy – as we all are – but  that simply will not happen without small businesses feeling they can drive forward their growth plans. There are 5.5 million SMEs in the UK and when their growth predictions fall, we all need to sit up and listen.”