Business confidence has tumbled on the back of worldwide economic instability and fears that the Chancellor has become less business-friendly, according to a survey by accountancy group Smith & Williamson, which has a large office in Bristol.
The firm’s latest Enterprise Index shows expectations that the economy will improve over the next 12 months have fallen substantially from previous highs of 80% in the last quarter.
Confidence fell 11 points as respondents reacted to on-going international problems and statements from George Osborne that they considered less than friendly to SMEs. 
Smith & Williamson Bristol partner David Roper, pictured, part of the firm’s entrepreneurial services team, said: “Respondents’ optimism for their own prospects over the next 12 months declined by 8 points to 74% and there is little support for an interest rate rise. However, 24% of respondents recognised that business confidence is being adversely affected by the Bank of England’s decision to maintain interest rates at historically low levels.”
Overall, the Smith & Williamson Enterprise Index remained strong, up one point, at 115.4. The negativity surrounding the economy and business prospects over the next 12 months were offset by the belief in a growing talent pool. Over 64% of respondents planned to increase headcount in the next quarter with 50% believing the employment pool to be adequately trained, both reaching highs not seen since the end of 2013.
“Uncertainty over UK interest rates, economic troubles in China, a potential Brexit and upcoming US political instability will continue to trouble financial markets throughout 2016 and so this declining confidence could be a sign of things to come. With optimism surrounding recruitment normally reaching its peak at the start of the calendar year, it will be interesting to see whether the Enterprise Index can maintain its strong reading if this early year hopefulness recedes,” said David Roper.
George Osborne announced major changes in the second half of 2015 which will adversely impact many entrepreneurs and their businesses. In the Summer Budget he announced changes to the taxation of dividends and in his Autumn Statement he put forward his plan for quarterly tax reporting by 2020.
Following a 10 point drop in the last quarter, respondents continued to react with a further four point decline in the belief that current government policy is supportive of private enterprise. In particular, 59% believed that the increase in the level of taxation on dividends will negatively affect SME business growth.
Mr Roper added: “Essentially, these changes mean that businesses could end up bearing substantial extra cost just to maintain the status quo. Many owner-managers will find themselves on the wrong side of the dividend tax changes and the introduction of quarterly reporting could be both burdensome and expensive,”
2015 became a conveyer belt of macro-economic hurdles for the British economy – the abandonment of the Swiss peg, swiftly followed by the General Election, a slowdown in China and an ongoing decline in the oil price undermined confidence and caused the financial markets to remain jittery.
Mr Roper explained: “While these wider market issues may not have directly affected the majority of UK businesses, these widespread concerns will have filtered down to SMEs, suppliers, lenders and consumers. Somewhat surprisingly, 58% of our respondents believed that access to funding was declining in the last quarter to reach its lowest point since 2014.”
“Notwithstanding these negatives, British business remains relatively robust with strong domestic demand and productivity starting to trend higher. As a result over 68% of our respondents believed that 2015 was a positive year for British business.”
