Declining Business Confidence for SMEs

Declining Business Confidence for SMEs

The British Business Bank’s (BBB) Small Business Finance report gave mixed views for the future of SMEs. However, one thing that is clear is that SME’s are going through a period of declining business confidence. We can attribute this to various macroeconomic factors such as the rising costs of doing business, low consumer demand and of course, Brexit. The knock-on effect Brexit is having is profound. As a result, it is impacting the way that SMEs perceive the future, manage their money and is ultimately holding them back from expanding headcount.

SME Confidence in 2017

During 2017, the majority of SME confidence surveys revealed that business confidence was down.  Business confidence was at its lowest ebb since October 2011 according to the Markit UK Business Outlook. Likewise, the Federation of Small Business’ (FSB) Voice of Small Business survey reported  declining business confidence in every quarter of 2017.

SME’s growth aspirations have been reportedly stunted by the slow domestic economy. Fifty-five percent of small businesses said that they see the economy as an obstacle for growth, down by almost 2% on last year.

The 2017 British Business Bank Business Finance Survey also shows a minor decrease in small businesses who were expecting growth for the next year, again down from 37% in 2016 to 35% in 2017. These numbers are consistent across the board for SME confidence.

The share of businesses expecting to downsize or close their business over the coming 12 months stood at 14.6%. This has increased from 9.4% a year ago and is the highest since records began in 2012.


According to the report, the majority of SMEs see no major impact on their business on leaving the EU. However, fewer noted that they would grow.

This isn’t surprising given the uncertainty presented by Brexit. Moreover, Brexit impacts businesses which conduct trade with Europe and, in most industries, there are a limited number of SMEs that import and export.

The uncertainty factor has impacted SMEs’ growth plans and business confidence. The number of SMEs who expected growth because of Brexit has halved since 2016. Small businesses are also looking at potentially reducing investment and headcount. Fifty four percent of SMEs said they were investing less, and 51% would hire more staff if Brexit wasn’t happening. To contrast, only 19% expected to invest a greater amount and 10% expected to hire more staff.

Whilst the SME community is relatively confident they won’t be negatively impacted by Brexit, it’s clear that the uncertainty presented is making their projected business planning more cautious. Investment decisions are being delayed or scaled back, which will undoubtedly force small businesses to reconsider their finance options. The next year will be key for SMEs and the UK economy as the UK negotiates its future outside the EU.

To discuss your small business finance needs, please don’t hesitate to contact us on 0191 410 4776 or online

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