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Small business confidence up but profits down

By Chris Dawson January 12, 2017 - 11:25 am

How’s business for you so far this year? According to the The Federation of Small Businesses (FSB) UK small business confidence has bounced back to pre-Brexit referendum levels although profits aren’t necessarily great.

The headline confidence measure now stands at +8.5, up from -2.9 in the previous quarter and reaching almost exactly the same level as it stood at the start of 2016 at +8.6. This survey confirms that at the start of 2017, the UK’s small firms are upbeat about their prospects.

Interestingly London and Scotland, two of the notable remain areas in the Brexit referendum, are out of step with the rest of the UK and still in negative territory.

However, it’s not all good news, although confidence across most of the country is positive and there are areas of strong performance, most small firms are not seeing this feeding through to profits. Profitability has dropped for the second quarter in a row.

The FSB also warns that investment intentions remain subdued and have fallen compared to last year with costs of doing business continuing to rise.

Mike Cherry, FSB National Chairman, explains “Despite the overall positive picture, our members still face many challenges as rising costs squeeze margins even further. The falling pound is driving up the price of imports and rising oil prices are being reflected in higher fuel costs. These inflationary pressures and price competition are hitting the bottom line hard with the majority of small firms seeing their profits continue to fall.”

28% of businesses (compared to just 5.4% a year earlier) are citing the exchange rate as the main cause of cost inflation as the pound remains at consistently lower levels against other major currencies. This week the pound has hit its lowest level against the dollar since the UK voted to leave the EU.

Does the FSB assessment marry with your recent experience and expectations for 2017? Are you optimistic of pessimistic for the future and more importantly are you making any money?

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