Small business confidence slumped in the ‘golden quarter’ of 2023

The latest reading reflects a similar recording back at the half-year mark when -14.2 points was recorded in the second quarter.

Small business confidence in 2023 “lost ground” during what is often considered the “golden quarter” of the year, a leading industry support group has announced.

The Federation of Small Businesses‘ (FSB) UK Small Business Index dropped in the final quarter of 2023 to -15 points in the final quarter of the year, down from -8 points in the third.

The latest reading reflects a similar recording back at the half-year mark when -14.2 points was recorded in the second quarter.

Hospitality came in on a landslide as the “gloomiest sector,” with a total reading of -73 points, a drop from its previous reading of -31.1 points. Retail recorded -29.8, a slight fall from its previous -22.3.

Tina McKenzie, FSB’s policy chair, said: “It’s especially disheartening that this slip in confidence happened in the so-called ‘golden quarter’, which so many hospitality and retail firms in particular rely on to shore up their finances ahead of the new year’s belt-tightening.

“With small hospitality firms reporting a big fall in their confidence, there are fears of yet more distress and closures among this sector, so vital to community spirit and our social fabric.

“The help extended to small firms in the retail, leisure and hospitality sectors at the Autumn Statement via an extension of business rates relief is a welcome start, and will mitigate their tax burden later this year, but right now things are tough.”

The news comes after the Natwest SME PMI Business Activity Index recorded the highest growth for SMEs in seven months.

While this was seen as a “positive sign,” the responses still highlighted that some firms were beginning to make operational sacrifices to cut costs.

McKenzie said: “The recent falls in inflation, notwithstanding the small uptick in the most recent figures, and the plateauing of interest rates have given many small firms a bit of breathing space.

“A more benign economic environment is good news for confidence, but not necessarily enough by itself to bring about the levels of growth we need, which is why we’re calling for a combination of growth-focused measures in the upcoming Budget.”