Small business confidence sinks amid Brexit fears

Confidence among small businesses is at a four-year low because of concerns among companies that the economy will weaken as Britain prepares to leave the European Union.

A survey by the Federation of Small Businesses has revealed that confidence has fallen for the third consecutive quarter. Those who are pessimistic about their prospects outweighed those feeling optimistic for the first time since 2012. The lobby group described the study as a wake-up call for politicians to act to “avoid an economic slowdown”.

The gloomy sentiment came despite several relatively positive economic indicators in the wake of June’s vote.

The FSB said that companies had reported “many immediate economic conditions improving”, with businesses enjoying greater access to finance and a rise in new employment. The share of small businesses aspiring to grow over the next 12 months also went up during the third quarter.

Small exporters’ performance improved, helped by the weakness in sterling in the wake of Brexit, with more businesses expecting this to rise further over the next three months.

However, positive factors were overshadowed by fears that there may be a weaker long-term economic outlook as Britain prepares to negotiate new trading positions. Companies were concerned, too, about rising foreign exchange and employment costs.

At a meeting with representatives from a cross-section of UK companies, the chancellor promised to support business and to be an advocate for free trade as the country adjusts to Brexit.

Setting out the government’s business-friendly approach this week, Philip Hammond held discussions with the FSB, CBI and the British Chambers of Commerce, as well as individual companies, to work out how “to make the most of the new opportunities that Brexit presents”, the Treasury said.

Attempts to restore business confidence will be crucial in the months ahead because nowhere is the country more downbeat about the post-Brexit future than in Britain’s boardrooms. Companies are threatening to starve the country of much-needed investment by delaying decisions until the economic outlook and European trading arrangements become clear.

Mr Hammond tried to assuage concerns by seeking suggestions for “actions the government can take to support economic and wage growth in an economy that works for everyone”, which may be incorporated into November’s autumn statement.

He also promised that “the government will offer support to firms through any period of adjustment while Britain forges a positive and powerful new role for itself in the world”.

The chancellor said: “My message to businesses is clear: In our negotiations to leave the EU, we will work hard to get the best deal for Britain and that includes ensuring that British companies can continue to trade with the single market in goods and services.

“We have an opportunity to forge a new role for ourselves in the world, to negotiate our own trade deals and be a positive and powerful force for free trade.”

Mr Hammond also held discussions with senior executives from John Lewis, Rolls-Royce, BAE Systems and Cisco about boosting Britain’s productivity to lift its long-term prospects.

The FSB emphasised that Brexit was not the sole reason for retreating confidence among its members.

Mike Cherry, its national chairman, said: “There is no doubt that the political shock of the Brexit result has taken place at a time of weakening business confidence. For the first time in four years, confidence is in negative territory. We look to the party conferences and upcoming autumn statement to green-light infrastructure projects at local and national level, to simplify the tax system and to help reduce the costs of doing business.”