The latest Small Business Index (SBI) from the Federation of Small Businesses (FSB) for Q4 2015 shows a growing gap in confidence between businesses in Scotland, North East England and Wales and those in the Midlands and the South of England. 
While there is good news for the UK as a whole in terms of job creation, increasing revenues and improving productivity, firms in the North East of England, Scotland and Wales risk being left behind.
In the last 12 months, smaller firms in the North East, Yorkshire, Scotland and Wales have all shown a year-on-year decline in confidence. In Wales, confidence has dropped into negative territory for the first time in two years. In Scotland, confidence levels are at their lowest levels since the start of 2013. Elsewhere confidence levels have remained stable, supported in particular by firms in technology and business/professional services.
Overall confidence across the UK remains in positive territory standing at 21.7 points which is 4.1 points higher than Q4 2014. Nearly two thirds (59%) of businesses anticipate growth relatively unchanged from the last quarter, with almost one in four firms (24%) reporting a growth in revenue in the last three months, the highest since 2010.
Smaller businesses are still leading the way on job creation with firms reporting that they have expanded their staff in the last three months, with more planning to do so this Spring.
Results also show smaller firms are making greater productivity gains and producing more for less. The SBI shows productivity has reached an all time high of three per cent which has doubled in the last 12 months.
The amount of spare capacity is at its lowest level reported, giving further credence to expectations of an interest rate rise later this year.
John Allan, FSB National Chairman, said:
“A clear divide in confidence is now emerging across different parts of the UK, with businesses in the South and in sectors like technology and professional services feeling more positive about 2016. The recent flooding is likely to further weigh on business confidence in the North where small firms are now beginning to pick up the pieces as the waters recede.
FSB members across the country tell us they are concerned about a number of business challenges coming down the line in 2016. This includes the rollout of pensions auto-enrolment, the new National Living Wage, and changes to taxes on dividends. Members are also deeply worried about proposed mandatory quarterly tax reporting, which in its current form will add to the administrative burden of small firms and the self-employed.
Ministers need to be sensitive to the cumulative impact of challenges that small businesses now face, which may already be reducing investment intentions. Flooding assistance should be easy to access with a promise of affordable flood insurance for small businesses. Digital quarterly tax reporting must be voluntary, piloted and brought in after a proper consultation and impact assessment. Our Index underlines the need for a simpler tax system. Nearly one in four small firms (22%) report tax burdens as the biggest barrier to growing their business, up from one in six (16%) just 12 months ago.”
