East Midlands small business confidence nosedives as significant challenges build

East Midlands small business confidence has tumbled in the last quarter, showing concerning signs way beyond the national average, a new report reveals.

The Federation of Small Businesses (FSB) quarterly Small Business Index (SBI) for the East Midlands shows a quarter two (Q2) reading of minus-43, which is significantly down from 17 in the previous quarter.

Whilst this drop in confidence mirrors other parts of the UK, the East Midlands has seen a more dramatic fall than the national average, which over the last quarter went from 15 in Q1 in 2022, to minus 25 in Q2 2022.

The figure is the lowest recorded outside of periods when significant trading restrictions aimed at halting the spread of Covid were in place.

Rav Panesar, FSB East Midlands policy representative

In the East Midlands, the greatest perceived barriers to growth over the coming twelve months are the domestic economy (63 per cent), appropriately skilled staff (33 per cent), and fuel costs (30 per cent).

Concerns over appropriately skilled staff have notably increased since Q1, when the respective score stood at 15 per cent.

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In Q2 of 2022, 44 per cent of small businesses in the East Midlands reported a decrease in revenue, as economic uncertainties impact consumer habits and business performance.

Resilience is also falling; In Q1 2022, 43 per cent of small businesses in the region reported an increase in revenue but this has slipped to 30 per cent in Q2, a fall of 13 per cent.

Nationwide performance is slightly higher, with 35 per cent of businesses reporting an increase in revenue in Q2.

The East Midlands scores the worst in terms of an employment level decline compared to other regions in the UK, with ‘actual’ employee cuts worse in Q2 than was predicted in Q1.

The employment situation for East Midlands small businesses has seen a return to net negative figures, with 18 per cent decreasing staffing in Q2 2022 (versus 11 per cent in Q1).

In Q2 2022, six per cent of East Midlands small businesses reported an aspiration to grow rapidly (increase turnover/sales by more than 20 per cent) and 32 per cent reported aspirations to grow moderately (increase turnover/sales by up to 20 per cent).

However, the proportion of those in the region seeking to downsize or consolidate their business has risen in Q2 from Q1, from two per cent to 13 per cent.

Rav Panesar, FSB East Midlands policy representative, said: “The cost of doing business crisis has worsened to the point where confidence is now lower than during last year’s massively disrupted festive trading season.

"Business owners across the East Midlands are trying to absorb additional cost pressures but can only do so much before they’re forced to raise prices or worse close their doors.

“The small business community reduced in size to the tune of hundreds of thousands over lockdowns.

"Unless policymakers act fast, history is set to repeat itself.

“Businesses desperately need help with the charges that hit them regardless of profitability: business rates, national insurance, utilities, fuel and those linked to supply chain disruption.

“We’re now looking to local policy makers for unequivocally pro-business, pro-growth commitments – this must include UKSPF and devolution conversations, small businesses growth must be central to their design.”