SCOTTISH small businesses have reported the highest levels of confidence in three years, but mounting costs have hit the profits of more than a third.
The Federation of Small Businesses (FSB) revealed on Monday that its Voice of Small Business Index research showed that, after rising for four successive quarters, Scottish small business confidence is at its highest since the start of 2010.
However, the Scottish figure still lags behind the UK average.
The small business lobby group’s research also showed a rising proportion of Scottish small firms benefiting from increased revenues, with four in 10 businesses registering rising turnover.
However, with one in four Scottish enterprises highlighting mounting business costs, only 31 per cent of FSB members reported increased profits in the last quarter, with 34 per cent reporting a fall.
Scottish firms also cite falling levels of spare business capacity, although the research suggests that this is not yet resulting in increased recruitment plans.
The FSB in Scotland argues that this underlines the need to deliver the right support to help the smallest businesses get hiring where conditions allow – moving away from government schemes designed to put particular client groups into jobs and instead focusing on giving those businesses with most recruitment potential the advice and support they need.
Encouragingly, firms predict increased profits in the next quarter, with three in 10 businesses also planning to increase their level of capital investment spending – a key driver of sustainable growth.
Welcoming the results, the FSB’s Scottish policy convener, Andy Willox, said: “The figures suggest a fledgling Scottish small business recovery is under way. Increased revenues and reduced levels of spare capacity suggest that firms are busier than they have been for a long time, but their profits and growth prospects continue to be put under threat by rising overheads.”
However, he added: “If we’re to turn busy small businesses into growing small businesses, we need to ensure that we have a package of business support that’s easy to access and understands small firms’ needs.”