Small firm confidence grows
Hiring intentions indicator north of the Border ‘highest since 2010’
CONFIDENCE among small businesses in Scotland has climbed to its highest level for more than a year in the latest quarter, but remains significantly adrift of the UK average, a survey has revealed.
The report, published yesterday by the Federation of Small Businesses (FSB) in Scotland, also showed the hiring intentions of small firms north of the Border were at their strongest since comparable records began in 2010.
The FSB’s latest Small Business Index (SBI) for Scotland, which measures confidence and is weighted according to the strength of responses from firms about if they expect prospects to improve or deteriorate over the coming three months, rose to plus-9 in the second quarter from minus-1 in the preceding three months. The latest reading matched that for the first three months of 2012, and was five points ahead of the SBI level a year ago.
But it was well adrift of the UK average reading of plus-15.9 in the latest quarter. This UK reading was up from plus-6.3 in the opening quarter of 2013.
Colin Borland, head of external affairs for the FSB in Scotland, believed the weaker confidence reading in Scotland might reflect a higher proportion of firms in the hospitality and tourism sectors.
Asked about the weaker confidence reading in Scotland, Mr Borland replied: “I don’t know if it is to do with the sort of sectors that disproportionately dominate our economy and the kind of issues
SMALL BUSINESS INDEX
that are there. I am thinking particularly about hospitality and aspects of tourism. That is obviously a sector that has very big gas and electricity bills, and that (utility costs) is an area that is coming through as a brake on growth.”
He also highlighted hospitality and tourism firms’ dependence on consumer spending, in the current tough economic environment.
Mr Borland, however, welcomed the increase in confidence reported by small firms in Scotland.
He said: “It is quite refreshing because we seem to have been reporting either bad results or looking very hard for positive things. This does look encouraging.”
Mr Borland added: “Obviously we are coming from a very difficult place – there is no point pretending otherwise – and it is all relative. But I would rather it was better this quarter than the last quarter and I am glad the year-on-year figures are better.
“There are a few things coming out now which seem to be painting a more positive picture. We just need to make sure we don’t let it slip through our fingers.”
Subtracting the percentage of small firms in Scotland expecting to reduce employment in the coming three months from that forecasting an increase, a net 4% predicted a rise in headcount.
The FSB survey found 74% of small firms in Scotland held employment steady in the second quarter, with the remainder split equally between increasing and reducing the workforce.
A net 10% of Scottish small businesses predicted a rise in revenues in the coming three months, after a flat second quarter.
One in four Scottish small firms said they were experiencing “significant” increases in costs.
A year earlier, one in five small firms north of the Border had reported a significant rise in costs.
Reflecting higher costs, a net 17% of Scottish small firms suffered a fall in profits in the second quarter. This was a slight improvement on a balance of 22% reporting a slide in profits in the first quarter.
A net 5% of Scottish small businesses forecast a slide in profits in the coming three months.
In spite of the rise in confidence among small firms in Scotland, and
signs of improvement in the affordability and availability of credit, investment intentions among these businesses have fallen in the second quarter.
Only 8.1% of Scottish small firms expected to raise capital investment over the next 12 months, down from 10% in the survey for the second quarter of 2012.
Asked if he would like to have seen better investment intentions, Mr Borland replied: “Yes. That is disappointing...With a still tough but slightly loosening credit market, you would think more people would be looking at making a capital investment this year.”
He added: “The confidence is good, hiring intentions are good, the capital investment thing is a concern, as is the disproportionate effect on Scottish businesses of the rise in fuel and electricity prices.”
The latest survey was conducted between May 7 and 21, and a t t r acted responses from 261 FSB member firms in Scotland. THE European Commission gave unconditional approval to IntercontinentalExchange (ICE) to buy NYSE Euronext for $8.2 billion (£5.3bn), in a deal that strengthens ICE’s presence in the lucrative derivatives trading business.
The EU regulator said its investigation into the merger found it would not raise antitrust concerns as the two exchanges were not direct competitors. It was reported last week that approval would be given unconditionally.
“The market investigation revealed they do not exert a greater potential competitive threat on each other comparedtootherexchanges. Any anti-competitive effects can therefore be excluded,” the Commission said in a statement.
The acquisition gives ICE control of London-based Liffe, Europe’s second-largest derivatives market, and will help it compete with US rival CME Group.
The Commission said it especially examined the effect the merger would have on agricultural and soft commodity derivatives, as well as on US equity derivatives, but that its investigation found no competition concerns.
New EU derivatives rules, to be phased in this year, will dramatically expand the demand for clearing overthe-counter contracts. The deal also boosts ICE’s presence in the interest rate futures business.