Confidence of UK Small Businesses At An All-Time Low


Business Confidence

A survey released this week shows that the UK business sector is currently facing its lowest ever levels of confidence since records began. The Business Trends survey, which has been conducted by the accountants BDO annually since 1995, paints a worrying picture for the UK economy.

In addition, BDO has called for a greater revision of the downward growth that is forecast for 2011. The Office of Budget Responsibility (OBR) dropped its prediction for next years economy this week, down to 2.6% from the previous 3.5% estimate provided by the Labour Government. BDO believe that the lack of confidence from the small business sector suggests that there will only be tiny growth of around 1%.

The biggest fear is that consumer confidence in small business will drop severely if the future of these small businesses appears uncertain. Other factors are the unknown effect of the predicted huge cuts in public sector spending and the potential for the European debt crisis to spread further.

However, the OBR did estimate that the amount of public borrowing, public deficit and overall net Government debt will be slightly less than the previous Labour Government anticipated. This suggests that large public service cuts are on the horizon in the Emergency Budget next week, although any definitive answers will have to wait until then.

It is clear that the Coalition Government will have to tread an extremely fine line between making sacrifices to keep public borrowing under control while also attempting to stimulate the economy. Peter Hemington, partner of BDO LLP, suggests that Government rhetoric in regards to spending cuts has contributed to the fall in small business confidence and has made them unwilling to commit to any growth plans until the full extent of these cuts are revealed.

The most important thing that the Government can do for small businesses at the moment is to reassure them that they believe the best way to ensure economic recovery is through healthy private sector growth.

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