Faith in the economy among small businesses has plummeted in August, research finds.

Faith in the economy among small businesses has plummeted in August, research finds.

SME optimism in the economy fell significantly from a net balance of +4 per cent in July to -12 per cent in August, according to BDRC Continental’s Business Opinion Omnibus of more than 450 companies.

This month’s drop marks the lowest economic optimism levels since March 2009, and comes after six months of relatively stable net optimism ratings.

The decline in overall optimism is most marked amongst the smallest businesses. Those with less than ten employees remain the most pessimistic, with a net score of -16 per cent. Those with 11-50 employees see the biggest change in August, down 21 points, but remaining positive (+5 per cent). The net optimism ratings of the larger businesses, (50-250 employees), was stable month-on-month (at zero).

SME confidence in their own trading prospects also fell this month, moving from a net balance of +31 per cent in July to +21 per cent in August. Trading prospects have fallen steadily since May.

Manufacturers had a net balance of +14 per cent for their trading prospects, a significant decline on +37 per cent in July.

Trading prospects for the services industry have remained relatively high at +32 per cent, falling 6 per cent since last month. Retail and distribution remain the least confident sector with a net balance of just +9 per cent, falling from +16 per cent last month.

Shiona Davies, director of financial and business at BDRC Continental says, ‘August has been a challenging month for the global economy with the downgrading of US credit ratings, considerable concerns within the Euro, and closer to home, rioting in Britain all of which will have impacted SME sentiment.

‘This month’s Business Opinion Omnibus results have reflected the growing concern amongst SMEs and are a strong indication that businesses fear a double-dip recession. This is now starting to impact on optimism amongst SMEs for their own business, albeit SMEs remain more confident about their own prospects than those of the economy more generally.’

See also: Marketing confidence drops to new low

Related topics: Economy, Optimism